Iron Condor Diagram. The above chart shows the expiration payoff for a hypothetical short iron condor position constructed with the following vertical spreads in the same expiration cycle. This page explains iron condor profit or loss at expiration and the calculation of its maximum profit maximum loss break even points and risk reward ratio.
For instance it can show how a particular leg contributes to total pl. The distance between strikes on each side is the same. It is composed of four different options.
As you can see on the payoff diagram a short iron condor isnt just a defined risk trade but also a defined profit trade.
Lets understand the value and profit payoff of a collar at a high level before diving into the calculations. The iron condor strategy iron condor the iron condor is a trading strategy for options that uses two spreads both vertical. The maximum loss occurs when the price is anywhere outside of the two long strikes. Value of our position.