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Iron Condor

You think BTC is range-bound for the next two weeks. Selling a naked strangle would give you the exposure you want, but you like sleeping at night. An iron condor gives you the same thesis with a known worst-case.

You sell an OTM put spread and an OTM call spread. You collect a net credit. If the underlying stays inside the box, you keep it. If it blows through either side, your loss is capped by the wings. That's it.

💡

An iron condor is just two spreads that don't talk to each other.

What You Do​

The SetupYou receive premium
Buy1 far OTM put (lower wing)
Sell1 OTM put (lower body)
Sell1 OTM call (upper body)
Buy1 far OTM call (upper wing)
Max Profit
Net credit
Max Loss
Wing width - credit
Upper BE
Short call + credit
Lower BE
Short put - credit

An iron condor is a bull put spread stapled to a bear call spread. If you understand verticals, you already understand this.

How the P&L Works​

Five zones. Think of it as a box with two walls:

  1. Below lower wing. Max loss on the put side. Both puts ITM, but the long put caps your bleeding.
  2. Between lower wing and short put. Losing, but less than max. The put spread is partially ITM.
  3. Between the two short strikes. The money zone. Both short options are OTM, decaying toward zero. You keep the full credit.
  4. Between short call and upper wing. The call spread is working against you. Credit provides a cushion.
  5. Above upper wing. Max loss on the call side. Capped by the long call.

Worked Example​

BTC at 93,400. You sell the 88k/85k put spread and the 98k/101k call spread. 14 days to expiry. IV is sitting at 52% after two weeks of range-bound chop.

Net credit: 780. Wing width: 3k. Max loss: 2,220.

BTC at Expiry
Put Spread
Call Spread
P&L
$82,000
-$3,000
$0
-$2,220
$85,000
-$3,000
$0
-$2,220
$87,220
-$780
$0
$0
$88k-$98k
$0
$0
+$780
$98,780
$0
-$780
$0
$101,000
$0
-$3,000
-$2,220
$105,000
$0
-$3,000
-$2,220

You risk 2,220 to make 780. That's a 2.8:1 risk-reward against you. Sounds terrible on paper. The reason people do this is probability: if you place the short strikes at 15-delta, roughly 70% of these expire profitable. The math only works if you manage the 30%.

Explore the Payoff​

Spot at Expiry$100k
$70k$130k
Net Credit$3k
$1k$5k
BE $92kBE $108k$0+$3k-$2k$70kK1 $90kK2 $95kK3 $105kK4 $110k$130kSpot Price at ExpiryP&L
Settlement
$100k
P&L
+3.0k
Max Loss
-$2k
Max Gain
+$3k

When to Use​

  • You expect BTC to stay range-bound. The dead weeks between FOMC meetings, post-halving drift, the January lull
  • You want to sell premium with defined risk (unlike a naked strangle where a liquidation cascade wipes your account)
  • IV is elevated relative to realized vol -- you're collecting more credit for the same strike width
  • You want a high probability of profit trade and accept that the wins are small relative to the occasional loss

BTC iron condors work best in the dead weeks between macro catalysts. IV is low, realized vol is lower, and the market is waiting for a reason to move. That's when the box holds.

Common Mistakes
The mistakeNot closing the untested side when it's nearly worthless.
The realityIf the put spread is worth $0.02 while BTC grinds toward your call side, close it. You lock in that wing's profit and free up margin. Leaving it open for two extra dollars of premium while the other side is blowing up is amateur hour.
The mistakeHolding through expiry week gamma risk.
The realityGamma explodes in the last 3 days. A position that looked safe at 10 DTE can go from profitable to max loss in a single 4-hour candle. The standard play: close at 50% of max profit, or with 5 DTE remaining, whichever comes first.
The mistakeSelling condors before known events (CPI, FOMC, ETF decisions, protocol upgrades).
The realityThe premium looks fat because the market is pricing in a move. You're not outsmarting the market -- you're selling cheap insurance the day before the hurricane. Condors are for boring markets, not exciting ones.
The mistakeUsing the same wing width on both sides when skew is steep.
The realityIf put skew is steep (puts are expensive), the put spread collects more than the call spread. Some traders widen the put side and narrow the call side to balance the risk. Mechanical symmetry isn't always the right call.

Greeks at a Glance​

Greek
Sign
Plain English
Delta
~0
Roughly neutral at entry. Stays neutral as long as BTC stays in the box.
Gamma
-
Large moves hurt you. This is the core risk. Gamma is your enemy inside a condor.
Theta
+
Time decay earns you money every day. This is what you're here for.
Vega
-
Rising IV hurts. If you put this on at 50% IV and it spikes to 70%, your mark-to-market craters even if spot hasn't moved.

Theta is your paycheck. Gamma is your risk. The whole game is getting paid by theta while gamma doesn't kill you.

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