A neutral, risk-defined strategy that gets paid when markets stay calm.
If you believe the market will stay in a range, and you want to generate premium with clearly defined risk, the iron condor is for you.
It is one of the most popular income strategies used by professional traders, especially in low-volatility or sideways markets.
What Is an Iron Condor
An iron condor is a four-leg strategy made up of two credit spreads:
- A bear call spread above the current price
- A bull put spread below the current price
- All four options have the same expiry
The result is a net credit.
You get paid up front, and your profit is maximized if the price stays between the inner strikes.
Structure
Let’s break it down.
Bear Call Spread (above)
- Sell call at Strike A
- Buy call at Strike B (higher)
Bull Put Spread (below)
- Sell put at Strike C
- Buy put at Strike D (lower)
This defines a range.
If the underlying asset finishes between Strike A and Strike C, all options expire worthless and you keep the full premium.
Risk and Reward
- Max gain = net credit received
- Max loss = difference between strike pairs minus the credit
- You are only at risk if price moves beyond the wings
- Losses are capped on both sides
This is a neutral, probability-driven strategy that benefits from time decay.
When to Use an Iron Condor
- You expect price to stay in a range
- Implied volatility is elevated
- You want to sell options with protection on both sides
- You are looking to generate yield with clearly defined risk
You are not betting on direction.
You are betting that nothing extreme happens.
On Derive
Derive makes iron condors easy to set up and manage:
- View real-time payoff diagrams and Greeks
- Track margin usage and risk with full transparency
- Collect DRV and OP incentives while generating yield
- Use subaccounts to isolate all four legs if required
Your Action Today
- Identify a price range where you believe BTC or ETH will stay until expiry
- Build a bull put spread below and a bear call spread above
- Track total premium collected and max loss
- Watch how time decay benefits you when price stays in range
Tomorrow, we shift focus to the Greeks again and learn how to manage Delta exposure like a pro.
Coming tomorrow:
Day 16 – Delta Hedging: How Pros Neutralize Risk
Hasta manana
Cpt
CptRandlelwa
