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Options · Volatility
Reverse Iron Condor
A defined-risk debit structure designed for a large move in either direction.
Direction agnosticAdvanced
Strategy mechanics
What the structure is designed to do.
A Reverse Iron Condor combines a long put spread below the market with a long call spread above it. The position pays a debit and is designed to benefit when the underlying moves outside the central range.
It offers limited risk and limited reward. The move needs to be large enough—and usually quick enough—to overcome the debit and the effect of time decay.
Risk check
This page is educational. Suitability depends on your objectives, experience, portfolio and ability to absorb loss.
Read the OCC options disclosurePayoff profileReverse Iron Condor
At expirationLoss is limited inside the middle range; profit is capped beyond either outer strike.
The setup
- Buy a put at strike A
- Sell a put at strike B
- Sell a call at strike C
- Buy a call at strike D
Decision map
Know the trade-offs before entry.
- When it fits
- A high-volatility outlook where a large move is expected but direction is uncertain.
- Break-even
- Strike B minus debit, and strike C plus debit.
- Maximum profit
- The adjacent strike width minus the debit paid.
- Maximum loss
- The net debit paid.
- Time decay
- Works against the position if the market does not move.
- Volatility
- A rise in implied volatility is generally supportive.
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