Iron Condor

An Iron Condor combines a Bull Put Spread and a Bear Call Spread to profit from minimal price movement within a range. It involves selling an OTM put and an OTM call and buying farther OTM put and call options for protection.

• Ideal for neutral markets, where price is expected to stay within a defined range.
• Risk and reward are capped, making it a safer strategy for range-bound conditions.
• Profits from time decay and low volatility.

Example:

• NIFTY trading at 18,000.
• Sell 17,800 Put at ₹100 and 18,200 Call at ₹100.
• Buy 17,600 Put at ₹50 and 18,400 Call at ₹50 (lot size = 50).
• Outcome:
  1. If NIFTY stays between 17,800 and 18,200 at expiry:
     • Both sold options expire worthless.
     • Net profit = ₹5,000 (premium collected).
  2. If NIFTY rises to 18,300 at expiry:
     • Loss on call = ₹5,000.
     • Put expires worthless.
     • Net profit = ₹0.
  3. If NIFTY falls to 17,700 at expiry:
     • Loss on put = ₹5,000.
     • Call expires worthless.
     • Net profit = ₹0.