Iron condors are the strategy most retail traders romanticize and most lose money on. The structure works. The discipline required to run it does not come naturally to anyone who has not blown up at least once.
Structure
Sell an OTM call spread above current price. Sell an OTM put spread below. Both expire the same day. Collect net credit. Profit if price stays inside the range until expiry. Max loss is the spread width minus the credit.
Why it works in low-volatility regimes
Low realized volatility means stocks tend to stay in range. Implied volatility is usually slightly above realized - the edge you are selling. When IV is depressed and stocks trade quietly, condors compound steadily. Wins are 30-50% of credit; losses are 200-400%.
The discipline that breaks people
- Take profit at 25-50% of max, not at expiry. The last 25% is not worth the convexity risk.
- Cut losers at 1.5-2x credit. Holding a losing condor to expiry is how accounts die.
- Do not adjust into a runaway move. 'Rolling' a losing condor often just doubles your bad bet.
- Size for the loss, not the win. If max loss on the condor is 4% of account, the position is too big.
When to skip them
Earnings season, macro event weeks, anything with binary news risk. Condors are a regime-dependent strategy. When the regime changes, the strategy changes. Forced trading is the failure mode.
The honest expected value
Run cleanly, condors should produce a slightly positive expectancy with low variance. They are an income strategy, not a wealth-building one. If you need them to make 30%/year, you will over-size and blow up. If you accept 10-15% and run them well, they do the job.