Strota / Iron Condor — The Safest Premium-Selling Trade

Iron Condor — The Safest Premium-Selling Trade

Short strangle + long wings. Defined max loss. The disciplined version of options income selling.

Iron condor = sell OTM call + buy further OTM call + sell OTM put + buy further OTM put. All four legs same expiry. The defined-risk version of a short strangle.

The long wings cap your max loss at the spread width minus credit collected. You give up ~20-30% of the short-strangle's credit for vastly reduced tail risk. For most retail traders, this is the right way to sell premium.

Worked NIFTY iron condor

NIFTY at 22,000, Tuesday morning, Thursday weekly expiry.

Sell 22,200 CE at ₹35 + Buy 22,400 CE at ₹10 (call credit spread = ₹25). Sell 21,800 PE at ₹30 + Buy 21,600 PE at ₹8 (put credit spread = ₹22). Net credit = ₹47 × 25 = ₹1,175 per lot.

Max profit = ₹1,175 if NIFTY closes between 21,800 and 22,200 at expiry.

Max loss = (200 spread width - 47 credit) × 25 = ₹3,825 per lot. Defined, capped, known at entry.

Reward:risk ≈ 1:3.3. Win rate needs to be >75% just to break even — but the win rate is typically high (70-85% on well-placed condors).

Iron condor vs short strangle

Strangle: ₹65 credit, unlimited risk. Better expectancy if you size right and manage well.

Condor: ₹47 credit, max loss ₹3,825. Worse per-trade economics but no tail-risk exposure.

For accounts under ₹10 lakh: condor is almost always correct. The capped loss means one bad trade can't wipe a meaningful chunk of capital.

Strike selection

Short strikes (the body): typically 0.8-1.5% OTM on each side.

Long strikes (the wings): 150-300 points further OTM. Wider wings = more credit but more risk per lot. Narrower wings = less credit but safer.

Common balance: 200-point wings on NIFTY (5 strikes apart). 300-400 point wings on BANK NIFTY.

What to do with this: For your first 10-20 condor trades, use the narrowest wings (100-point wings on NIFTY). Less credit but the smallest possible max loss — gives you time to learn position management without risking real damage on early mistakes.

Common misreads

Treating condors as 'safe' just because they're defined risk. A 3-4x max loss vs credit means a single bad trade can wipe several winning weeks.
Building condors that are too tight (short strikes too close to spot). Higher credit but lower win rate — and the times you lose, you lose big.
Forgetting to close 'risk-free' wings as the trade nears max profit. As wings approach worthless, leaving them open exposes you to assignment risk if (rarely) they end up ITM.

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Short Strangle

Iron Butterfly

Key takeaways

Four legs: short call + long call + short put + long put. All same expiry.
Defined max loss = (spread width − credit collected) × lot.
Win rate typically 70-85% on well-placed positions.
Reward:risk usually 1:2 to 1:4 — you need high win rate to be profitable.
Best for retail accounts where capped risk matters more than maximised per-trade credit.

Iron condor — common questions

How wide should the wings be?

On NIFTY: 100-200 points typically (i.e. wings are 2-4 strikes out from the short legs). Wider wings collect more credit but increase max loss; narrower wings reduce both.

When to close an iron condor?

Common rules: at 50-70% of max profit (book early to avoid expiry-day Gamma); when either short strike is touched (defend the threatened side); on the day before expiry to avoid pin risk.

What does 'rolling' an iron condor mean?

Closing the current expiry and opening the same structure on next expiry. Useful when one side is challenged — rolling lets you reset breakevens further from the new spot.

Iron condor vs iron butterfly?

Condor has separated short strikes (e.g. 21,800 PE and 22,200 CE). Butterfly has identical short strikes (e.g. 22,000 CE + 22,000 PE both sold). Butterfly collects more premium but has a narrower profit zone.

What's the typical margin for a NIFTY iron condor?

Span + exposure: usually ₹40,000-70,000 per lot. Lower than short strangle because the wings reduce the margin call from the exchange.

Build an iron condor →