- published: 18 Mar 2014
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The iron condor is an advanced option trading strategy utilising two vertical spreads – a put spread and a call spread with the same expiration and four different strikes. If the outer strikes are bought and the inner strikes sold a long iron condor is produced. The converse produces a short iron condor. The number of call spreads will be equal to the number of put spreads.
The position is so named because of the shape of the profit/loss graph, which loosely resembles a large-bodied bird, such as a condor. In keeping with this analogy, traders often refer to the inner options collectively as the "body" and the outer options as the "wings". The word iron in the name of this position indicates that, like an iron butterfly, this position is played across the current spot price of the underlying instrument having one vertical spread below and one vertical spread above the current spot price. This distinguishes the position from a plain Condor position, which would be played with all strikes above, or below the current spot price of the underlying instrument. A Call Condor would be played with all call contracts and a Put Condor would be played with all put contracts.