How to use the iron condor calculator
An iron condor combines a bull put spread below the current price with a bear call spread above it, all with the same expiry. You sell the two middle strikes, buy the two outer ones as protection and collect a net credit.
- Choose how to enter the premiums. “Premium of each leg” takes the four quotes separately. “Net credit only” takes the single price your broker shows for the whole order.
- Enter the current price of the underlying and the number of iron condors. One contract covers 100 shares.
- Enter the four strikes in order: long put, short put, short call, long call. The calculator checks the order. If the two short strikes are the same, the position becomes an iron butterfly.
- Enter the premiums per share as quoted, paid for the long options and received for the short ones.
The chart and table show the profit or loss at expiry across a range of prices, with the break-evens marked.
How an iron condor is calculated
At expiry, every option is worth its intrinsic value, so the payoff can be worked out exactly from the strikes and the credit:
Maximum profit = Net credit × 100 × Contracts
Maximum loss = (Wider wing − Net credit) × 100 × Contracts
Lower break-even = Short put strike − Net credit
Upper break-even = Short call strike + Net creditPremiums are per share. A wing is the distance between a short strike and the long strike beside it. Return on risk = Maximum profit ÷ Maximum loss.
The maximum profit is earned anywhere between the two short strikes, where all four options expire worthless. Beyond a long strike the spread on that side is worth its full width, so the loss stops growing.
A worked example
A stock trades at $100. You sell the $90 put for $1.40 and the $110 call for $1.30, and buy the $85 put for $0.60 and the $115 call for $0.50 as protection.
The net credit is $1.60 per share. On 5 contracts, that is a maximum profit of $800.00, kept in full if the stock finishes between the short strikes.
Each wing is $5 wide, so the maximum loss is $1,700.00: $5 minus the credit, times 100, times 5 contracts. The break-evens are $88.40 and $111.60, a profit zone $23.20 wide, or 23.20% of the stock price.
The return on risk is 47.06%: you put $2.13 at risk for each dollar you can make.
Choosing the short strikes: credit against room
Moving the short strikes is the main decision in an iron condor, and every choice is a trade-off. The three condors below all have $5 wings on a $100 stock; the premiums are illustrative.
| Short strikes | Net credit | Max profit (5 contracts) | Max loss | Return on risk | Break-evens |
|---|---|---|---|---|---|
| $95 / $105 | $2.40 | $1,200.00 | $1,300.00 | 92.31% | $92.60 and $107.40 |
| $90 / $110 | $1.60 | $800.00 | $1,700.00 | 47.06% | $88.40 and $111.60 |
| $85 / $115 | $0.85 | $425.00 | $2,075.00 | 20.48% | $84.15 and $115.85 |
The tight condor pays the best return on risk, but its profit zone is only 14.80% of the price wide, so an ordinary move can push it into a loss. The far condor rarely loses, yet it risks $4.88 for every dollar it can make, so one bad month can erase many good ones. A high return on risk is the price of a narrower zone, not a free improvement.
That is why traders look at the room to each break-even alongside the return. In the example, the stock can fall 11.60% or rise 11.60% before the position loses money. Whether that is a lot depends on the stock’s volatility and the time to expiry, which the implied volatility calculator helps you judge.
Unequal wings and the iron butterfly
The wings do not have to be the same width. If you buy the put protection further away, at $80 instead of $85, the long put costs less and the credit rises to $1.85. The catch is that the loss is no longer symmetrical: on 2 contracts, a fall below $80 costs $1,630.00, while a rise above $115 costs only $630.00. The calculator always reports the larger of the two as the maximum loss, because that is the capital genuinely at risk.
An iron butterfly is the variant where both short strikes are the same. Selling the $100 put and call and buying the $90 put and $110 call for a $6.20 credit gives a maximum profit of $620.00 against a maximum loss of $380.00, a return on risk of 163.16%. The break-evens at $93.80 and $106.20 are close together, and the full profit is only earned if the stock closes exactly at $100. In practice an iron butterfly is usually closed early for part of its credit.
What the payoff at expiry does not show
The flat-topped chart is the position’s value on expiration day. Before then the options still have time value, so the profit or loss is smaller than the chart shows in either direction. Time decay is slow at first and speeds up near expiry, so a condor earns only a fraction of its credit in the early weeks even if the price does not move. A sharp move or a rise in implied volatility can show a loss early, even if the price later returns to the middle. Many traders therefore decide in advance when to take profits or close a threatened side, rather than waiting for expiry.
What this calculator does not include
- Commissions and fees. Four legs to open and up to four to close add up, especially on narrow condors with small credits.
- The bid-ask spread. Enter the prices you actually traded at, not the midpoint, or the credit will be overstated.
- Early assignment. US stock and ETF options are American-style and can be assigned before expiry, most often a short call just before an ex-dividend date. Most index options are European-style and settle in cash.
- Margin. Brokers usually hold an amount close to the maximum loss as collateral, but the exact rule varies by broker.
- Probabilities and the Greeks. The calculator shows what happens at each price, not how likely it is. The option Greeks calculator shows how the position reacts before expiry.