Iron Condor Strategy with Example

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Iron Condor Strategy With Nifty Example

The Iron Condor is a neutral options strategy formed by combining:

  • ✅ Bull Put Spread

  • ✅ Bear Call Spread

It is best suited when you expect the market to remain range-bound with limited volatility.

This strategy offers:

✔ Limited Profit
✔ Limited Loss
✔ High Probability Setup
✔ Benefit from Time Decay (Theta Positive)

Let’s understand with your exact example using NIFTY 50.

📌 Market Assumption

Assume Nifty is trading near 25400 and you expect it to remain between 25200 and 25600 till expiry.

You create an Iron Condor as follows:

🔹 Step 1: Bull Put Spread (Lower Side)

  • Sell 25400 PE @ ₹200

  • Buy 25200 PE @ ₹80

Net Credit (Put Spread)

200 – 80 = ₹120

This spread profits if market stays above 25400.

🔹 Step 2: Bear Call Spread (Upper Side)

  • Sell 25600 CE @ ₹220

  • Buy 25800 CE @ ₹90

Net Credit (Call Spread)

220 – 90 = ₹130

This spread profits if market stays below 25600.

💰 Total Premium Received

Put Spread Credit = ₹120
Call Spread Credit = ₹130

✅ Total Net Credit = ₹250

This ₹250 is your Maximum Profit.

📊 Maximum Profit

Maximum Profit = Total Premium Collected

= ₹250 per lot

You earn full profit if Nifty expires between 25400 and 25600.

📉 Maximum Loss

Strike width on each side = 200 points

Maximum Loss = Strike Difference – Net Credit

= 200 – 250

Since total credit (250) is greater than individual spread width (200), actual loss is limited to difference between strikes minus respective side credit.

Put Side Risk = 200 – 120 = ₹80
Call Side Risk = 200 – 130 = ₹70

👉 Whichever side breaks strongly determines the loss.
But risk remains limited due to bought hedge options (25200 PE & 25800 CE).

📌 Break-even Points

Lower Break-even =
25400 – 250 = 25150

Upper Break-even =
25600 + 250 = 25850

👉 If Nifty expires between 25150 and 25850, strategy remains profitable.

🎯 When to Use Iron Condor?

✔ When market is expected to consolidate
✔ When volatility is high and likely to fall
✔ During weekly expiry range trading
✔ When strong support & resistance levels are visible

📊 Strategy Summary

ComponentValue
Market View              Neutral
Strategy Type      Credit Strategy
Max Profit               ₹250
Max Loss   Limited (₹70–₹80 approx)
Profit Zone         25150 – 25850
Ideal Condition      Range-bound market

🔥 Why Traders Use Iron Condor?

  • Generates income in sideways markets

  • Clearly defined risk

  • High probability setup

  • Takes advantage of time decay

🏁 Final Conclusion

The Iron Condor is a powerful neutral strategy combining a Bull Put Spread and Bear Call Spread.

With this Nifty example:

  • Premium Collected = ₹250

  • Profit is limited

  • Loss is limited

  • Best suited for range-bound market conditions

If Nifty stays between 25150 and 25850, the strategy generates profit. A strong breakout beyond that range results in limited, predefined loss.


#StockMarket #OptionsTrader #Nifty50 #IntradayTrading #IndianStockMarket
#TradingLife #ThetaGang #PassiveIncomeTrading


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