This guide covers the whole trade: the numbers on one lot, how to choose strikes, the Greeks that drive it, margin, entries, exits, adjustments, a worked week, costs, backtesting, and how to set it up as an algo bot with fixed exits.
Iron condor at a glance
| Feature | Iron condor |
|---|---|
| Market view | Range-bound: the index stays between two levels until you exit |
| Legs | Buy 1 OTM put, sell 1 OTM put, sell 1 OTM call, buy 1 further OTM call, same expiry |
| Maximum profit | The net credit, if the index expires between the short strikes |
| Maximum loss | Wing width minus the net credit, if the index expires beyond a long strike |
| Breakevens | Short put strike minus the credit, and short call strike plus the credit |
| Time decay | Works for you, slowly at first and fastest in the last days |
| Volatility | A rise in IV hurts, a fall helps |
| Margin | Low compared with naked selling, because the wings hedge the short legs |
| Typical users | Weekly index sellers who want a defined loss |
| Difficulty | Intermediate: four legs, and the exits matter more than the entry |
Key takeaways
- An iron condor wins when the market moves less than the option prices imply. On one lot of Nifty at 25,000 with 12 days to expiry and 14% IV, the model condor 24,500 / 24,750 / 25,250 / 25,500 collects ₹9,051 and can lose at most ₹7,199.
- The breakevens are near 24,611 and 25,389. The model puts the chance of finishing between them at about 46%, so the strategy depends on wins being larger than losses, or on exiting before the worst outcomes.
- Most of the profit arrives in the last few days, when gamma risk is also highest. Many traders take half the credit and close a day or two before expiry.
- Margin is a fraction of a naked strangle's, and the loss is defined before you enter. That makes the condor easy to size and well suited to automation with fixed rules.
- The exits decide the result: a profit target, a stop on the combined premium, a time exit and a daily account limit.
How an iron condor makes money
The trade has four legs, all on the same expiry:
- Buy a put well below the market. This is the lower wing.
- Sell a put closer to the market. This is the short put.
- Sell a call above the market. This is the short call.
- Buy a call further above. This is the upper wing.
The two short options collect more premium than the two wings cost, so you receive a net credit. The lower half is a bull put spread and the upper half is a bear call spread. Put together, they profit if the index stays inside the range and lose if it breaks out on either side.
At expiry the payoff has three zones:
- Between the short strikes: all four options expire worthless or the short legs expire worthless, and you keep the full credit.
- Between a short strike and its wing: the short option is in the money, and the profit shrinks point for point until it turns into a loss at the breakeven.
- Beyond a wing: the long option offsets the short one, so the loss stops growing. It equals the wing width minus the credit.
The numbers on one lot
Take Nifty at 25,000, 12 days to a weekly expiry, implied volatility of 14% and a lot of 65. These are model prices from the Black–Scholes formula, used for illustration:
| Leg | Strike | Model price | Per lot |
|---|---|---|---|
| Buy put | 24,500 | ₹65.35 | −₹4,248 |
| Sell put | 24,750 | ₹128.65 | +₹8,362 |
| Sell call | 25,250 | ₹168.05 | +₹10,923 |
| Buy call | 25,500 | ₹92.10 | −₹5,987 |
| Net credit | ₹139.25 | ₹9,051 |
| Measure | Value |
|---|---|
| Maximum profit | ₹9,051, anywhere between 24,750 and 25,250 at expiry |
| Maximum loss | (250 − 139.25) × 65 = ₹7,199, below 24,500 or above 25,500 |
| Breakevens | 24,611 and 25,389 |
| Risk to reward | ₹7,199 at risk to make ₹9,051 |
| Model chance of expiring between the breakevens | About 46% |
| Expected move to expiry (one standard deviation) | About ±635 points |
The expected move matters. The market is pricing a typical 12-day range of about 635 points either way, while the profit zone runs only 389 points above and below the spot. The condor is a bet that this week will be quieter than the options imply.
Profit or loss at expiry for one lot:
| Nifty at expiry | P&L |
|---|---|
| 24,400 or lower | −₹7,199 |
| 24,600 | −₹699 |
| 24,700 | +₹5,801 |
| 24,750 to 25,250 | +₹9,051 |
| 25,300 | +₹5,801 |
| 25,400 | −₹699 |
| 25,500 or higher | −₹7,199 |
Change the strikes, the volatility or the days left in the payoff builder below and the numbers update.
Interactive payoff chart: change the spot, IV, lot size and days to expiry to see the curve, breakevens and Greeks.
Choosing strikes
Two decisions shape the trade: how far the short strikes sit from the market, and how wide the wings are.
Distance of the short strikes
Closer short strikes collect more premium and give a narrower profit zone. Further strikes collect less and win more often. A common reference is the expected move: short strikes near one standard deviation away win often but collect little, while strikes at half of it collect more and are tested more often.
By delta
Many sellers pick the short strikes by delta. In the example, the 25,250 call has a delta of about 0.38 and the 24,750 put about −0.31. Moving out to the 25,300 call and 24,700 put lowers them to about 0.36 and −0.28. A short delta between 0.15 and 0.30 is a typical range for weekly condors: the lower the delta, the less premium and the higher the chance of finishing inside.
Width of the wings
Wider wings collect more credit but raise the maximum loss and the margin. Narrow wings cap the loss tightly but leave little credit after costs.
| Condor (one lot) | 24,500 / 24,750 / 25,250 / 25,500 | 24,400 / 24,700 / 25,300 / 25,600 |
|---|---|---|
| Wing width | 250 points | 300 points |
| Net credit | ₹139.25 (₹9,051) | ₹144.75 (₹9,409) |
| Maximum loss | ₹7,199 | ₹10,091 |
| Breakevens | 24,611 and 25,389 | 24,555 and 25,445 |
| Model chance of expiring inside | About 46% | About 52% |
| Theta a day at entry | +₹278 | +₹367 |
| Vega per IV point | −₹422 | −₹563 |
The wider condor wins more often and earns more theta, but its worst week costs ₹2,892 more. There is no best answer: choose the maximum loss you can accept first, then the width that fits it.
The Greeks of an iron condor
The Greeks explain why the condor's P&L moves as it does before expiry. For the example lot at entry:
| Greek | Per lot | What it means |
|---|---|---|
| Delta | −0.76 ₹ a point | Almost neutral: a small move barely changes the P&L |
| Gamma | −0.016 | Delta turns against you as the index moves toward a short strike |
| Theta | +₹278 a day | Time decay earns this much a day with the index unchanged |
| Vega | −₹422 per IV point | A one-point rise in IV costs this much |
Theta works slowly, then quickly
Theta is the condor's engine, and it is small at first. With 10 days left and Nifty unchanged, the model P&L is only +₹589. With five days left it is +₹3,077. Most of the credit decays in the final days, which is also when the position is most sensitive to a move.
Gamma near the short strikes
Gamma is small while the index sits in the middle of the range and grows as expiry approaches. In the last two days, a 150-point move toward a short strike can turn a comfortable profit into a loss within an hour. This is the main reason many condor traders do not hold into expiry day.
Delta drift
When the index moves, the condor's delta moves against you. A rally makes the position short delta, so further gains hurt more; a fall makes it long delta. Watching delta, or the distance to the short strikes, tells you when a side is being tested.
Vega
The condor is short vega. A spike in implied volatility, for example before an event, raises all four option prices and shows a loss even if the index has not moved. Volatility usually falls after the event, which helps the seller.
How an iron condor behaves before expiry
The expiry payoff shows where the trade ends. Before expiry, the P&L is smaller in both directions. Here is the model P&L for one lot with 10 days left, at the same IV and after a two-point rise in IV:
| Nifty | P&L at IV 14% | P&L at IV 16% |
|---|---|---|
| 24,500 | −₹1,265 | −₹1,618 |
| 24,700 | −₹41 | −₹718 |
| 24,850 | +₹488 | −₹336 |
| 25,000 | +₹589 | −₹260 |
| 25,150 | +₹255 | −₹494 |
| 25,300 | −₹456 | −₹1,002 |
| 25,500 | −₹1,783 | −₹1,986 |
Two things stand out. Early in the trade, even a 500-point move costs far less than the maximum loss, because the options still hold time value. And a rise in volatility can put the position in a loss on a day when the index has not moved at all. Traders who panic at small early losses tend to close good trades; traders who ignore a breach near expiry tend to take the full loss.
Margin for an iron condor
Because the wings cap the loss, the exchange recognises the hedge and the margin is far lower than for naked short options. In normal conditions a one-lot Nifty iron condor needs roughly ₹40,000 to ₹60,000, compared with several times that for a naked short strangle. Our F&O margin calculator shows how the figures are built.
Three rules matter:
- Place the wings first. The hedge benefit applies once the long options are in the account. Buying the wings before selling the short legs keeps the margin low at every step; doing it the other way round can block far more margin for a moment, or get the order rejected. Exit in reverse: buy back the short legs first, then sell the wings.
- Expiry-day margin. Since November 2024, short index options carry an extra 2% extreme loss margin on their expiry day. A condor held into expiry day needs more margin that morning.
- Size by the loss, not the margin. A low margin makes it tempting to trade many lots. The maximum loss, ₹7,199 a lot in the example, is the number to size by.
Margins change daily, so treat these figures as indications and check your broker's calculator before you trade.
Weekly and monthly condors
Since September 2025, NSE's weekly Nifty 50 options expire on Tuesdays and BSE's weekly Sensex options on Thursdays. Bank Nifty and FinNifty have monthly expiries only, on the last Tuesday of the month. The Nifty expiry date calendar lists the dates, including expiries moved by holidays.
- Weekly condors collect less premium per trade but decay quickly. Entries 5 to 12 days before expiry are common.
- Monthly condors collect more and give more time for the market to come back, but carry more vega risk and tie up margin for longer.
When to enter
Days to expiry
Entering with too many days left means slow decay and more vega risk; entering with one or two days left means high gamma and little premium. For Nifty weeklies, many traders enter between 4 and 10 days before expiry and plan to be out before expiry day.
Volatility
A condor collects more when implied volatility is high relative to its own history, and it benefits if volatility then falls. A low IV means thin premium for the same distance. Compare the current IV with its range over recent months, and with India VIX, before choosing between a condor and no trade.
Event days
RBI policy days, the Union Budget, election results and major global data can move the index well beyond a condor's range in one session. Many systematic sellers skip entries that would span such an event, or widen the wings for that week.
Time of day
The first minutes after the open have wide bid-ask spreads on the wings. Entering after 9:30 am usually gives better fills on four legs.
Exits: where the strategy is won or lost
Profit target
Taking profit at a set share of the credit, often 40% to 60%, captures most of the reward while avoiding the final days of gamma risk. In the example, a 50% target means buying back the condor when the combined premium falls to ₹69.60.
Stop loss on the combined premium
A stop based on the condor's total value is cleaner than separate stops on each leg. Because the maximum loss is ₹110.75 a unit, a stop must sit below it to mean anything. A common choice is 1.5 times the credit, which here is a loss of about 60% of the maximum: exit if the combined premium reaches ₹208.90, a loss of about ₹4,525 a lot.
Short strike breach
Some traders exit, or adjust, when the index touches a short strike, or when the short option's delta passes about 0.50. This reacts to the position rather than to the P&L, and works well with intraday monitoring.
Time exit
Closing by the afternoon before expiry day avoids the largest gamma moves and the expiry-day margin. The trade gives up the last part of the credit in exchange.
Daily MTM limit
An account-level MTM limit squares off every position when the day's loss reaches your limit; the guide on how to place stop loss order limits across all positions explains the setup. It protects against everything the trade rules miss, including several strategies losing on the same day.
A worked week, day by day
This is a model example, not a record of results. It uses the same condor, a 50% profit target, a stop at a combined premium of ₹208.90 and a time exit at 3:15 pm the day before expiry.
- Day 1, 9:35 amNifty 25,000, 12 days to expiry, IV 14%. Buy the 24,500 put at ₹65.35 and the 25,500 call at ₹92.10, then sell the 24,750 put at ₹128.65 and the 25,250 call at ₹168.05. Net credit ₹139.25, or ₹9,051.
- Day 2, 3:00 pmNifty 25,080, IV unchanged. The condor is worth ₹136.79. P&L +₹160: time decay is still slow.
- Day 4, 11:00 amNifty rallies to 25,320 and IV rises to 15%. The short 25,250 call is now in the money. The condor is worth ₹148.63, a loss of ₹610, well short of the ₹208.90 stop. The rules hold.
- Day 6, 2:00 pmNifty eases to 25,180 and IV returns to 14%, with seven days left. The condor is worth ₹120.85. P&L +₹1,196.
- Day 8, 1:00 pmNifty 25,060, IV 13.5%, five days left. The condor is worth ₹90.01. P&L +₹3,201 as decay speeds up.
- Day 10, 9:50 amWith Nifty near 25,000 and two days left, the combined premium falls through ₹69.60. The bot buys back the short legs and then sells the wings at a net ₹68.00. Profit (139.25 − 68.00) × 65 = ₹4,631 before charges, about ₹4,390 after them.
The trade kept about half of the credit and avoided the last two days. Had the Day 4 rally continued to 25,500, the stop would have closed the condor for a loss of about ₹4,525, less than the ₹7,199 maximum.
Adjustments
An adjustment changes the position when one side is tested. It can help, but each one adds costs and complexity, and backtests often show that a simple stop works as well. If you adjust, decide the rule before you enter and adjust once at most.
Roll the untested side closer
On Day 4 in the example, with Nifty at 25,320, you could buy back the 24,750 / 24,500 put spread for about ₹27.35 and sell the 25,000 / 24,750 put spread for about ₹52.66. That adds ₹25.31 of credit, or ₹1,645 a lot. The total credit rises to ₹164.56, the maximum loss falls to ₹5,554, and the breakevens move to about 24,835 and 25,415. The cost is a narrower profit zone: a fall back below 25,000 now hurts.
Close the tested side
Closing only the threatened spread locks in its loss and leaves the other side to decay. It reduces risk but often realises a loss that time would have recovered.
Convert to an iron fly
Rolling both short strikes to the current price turns the condor into an iron fly strategy. It collects more premium and narrows the range sharply. It suits a market that has moved and then stalled.
Let the stop decide
Many systematic traders do not adjust at all. They accept the stop when it is hit and enter the next week's condor. This keeps the rules simple, which matters when the strategy runs as a bot.
Iron condor, iron fly, short strangle or short straddle?
All four sell premium on a range-bound view. They differ in how much they collect, how often they win and how much they can lose. Same assumptions: Nifty 25,000, 12 days, IV 14%, one lot of 65.
| Strategy | Credit | Maximum loss | Breakevens | Model chance inside | Theta a day | Vega per IV point |
|---|---|---|---|---|---|---|
| Iron condor 24,500 / 24,750 / 25,250 / 25,500 | ₹9,051 | ₹7,199 | 24,611 and 25,389 | About 46% | +₹278 | −₹422 |
| Iron fly 24,700 / 25,000 / 25,300 | ₹15,867 | ₹3,634 | 24,756 and 25,244 | About 30% | +₹152 | −₹230 |
| Short strangle 24,700 / 25,300 | ₹17,128 | Unlimited | 24,437 and 25,564 | About 62% | +₹1,259 | −₹2,110 |
| Short straddle 25,000 | ₹32,994 | Unlimited | 24,492 and 25,508 | About 58% | +₹1,381 | −₹2,340 |
The condor and the fly have a defined loss and low margin; the strangle and straddle earn far more theta but can lose without limit.
Nifty, Sensex and Bank Nifty condors
- Nifty 50: weekly expiry on Tuesday, 50-point strikes, lot of 65. The deepest market for four-leg orders.
- Sensex: weekly expiry on Thursday on BSE, 100-point strikes. Useful for a condor on a different day of the week; check the bid-ask spread on the wings.
- Bank Nifty: monthly expiry only, 100-point strikes, lot of 30. Its implied volatility usually runs several points above Nifty's, so the same distance collects more premium and the index moves further.
Lot sizes are revised from time to time, so check NSE's and BSE's contract specifications before you trade.
Costs, slippage and tax
A condor has four legs, so costs count more than on a single option:
- Brokerage: eight orders for a round trip, ₹160 at ₹20 an order.
- Statutory charges: STT of 0.15% on the premium of options sold, exchange charges, the SEBI fee, stamp duty and GST. For the example trade they add about ₹80.
- Total: about ₹240 for one lot, or roughly 5% of the ₹4,631 profit in the worked week.
Slippage is often larger than the charges. The wings are cheap options with wide bid-ask spreads, and a market order on four legs in a fast market can cost several rupees a unit. Use limit orders where you can, and include slippage in every backtest. The brokerage calculator and slippage calculator work out both.
Tax: profits from F&O trading are generally taxed as non-speculative business income at your slab rate.
How to backtest an iron condor
A condor's backtest needs option prices for all four strikes at each step, not just the index. When you test one:
- Fix every rule first: entry day and time, short strike method (distance, delta or premium), wing width, profit target, stop, time exit and event filter.
- Include costs and slippage per leg. A backtest without them can turn a losing strategy into a winning one.
- Test across volatility regimes: calm months, trending months and event-heavy months. A condor that only works in one regime will disappoint.
- Look at the worst weeks, not only the average. Count how often the stop was hit and how large the maximum drawdown was.
- Change one setting at a time, and keep part of the data aside for out-of-sample testing.
Setting up the iron condor in QuantPower
The iron condor suits automation: its legs, targets and stops are exact, and the exits must happen without hesitation. The strategy builder includes an iron condor preset. Here is a full setup:
| Rule | Example setting |
|---|---|
| Instrument | Nifty 50, current weekly expiry |
| Entry | 9:35 am, 6 to 12 days before expiry |
| Legs | Buy the wings 500 points away, sell the shorts 250 points away |
| Order of legs | Buy the wings first, then sell the short legs |
| Profit target | 50% of the net credit |
| Stop loss | Combined premium reaches 1.5 times the credit (₹208.90 in the example) |
| Time exit | 3:15 pm the day before expiry |
| Daily limit | Your MTM loss limit for the account |
| Skip | Weeks that span RBI policy, the Union Budget or election results |
Step 1. Open the preset
In the strategy builder, choose the iron condor preset, set the index to Nifty 50 and the expiry to the current week, and set lots to 1.
Step 2. Set the strikes and exits
Choose how the short strikes are picked, the wing width, the profit target, the stop and the time exit. Add the event filter.
Step 3. Backtest it
Run the rules over past expiries with costs and slippage on. Then change one setting at a time: the distance, the width, the target.
Step 4. Paper trade it
Run the condor on live prices with virtual money for a few weeks, including at least one trending week, and compare the fills with the backtest.
Step 5. Set the account limit
Before anything goes live, set your daily MTM loss limit in the risk settings. When it is hit, every position is squared off.
Step 6. Deploy the bot
Connect your broker, choose the strategy and lots, confirm the limits and deploy. The bot places the wings and short legs in order and manages the exits on its own.
Step 7. Monitor and pause
Watch the positions during the week, and use Pause all if you need to stop every bot at once. The bot runs in QuantPower on your own computer or VPS and sends orders to your own broker account through the broker's API, within SEBI's retail algo framework. Keep that computer or VPS on and logged in to your broker during market hours. Ready-made strategy templates, such as straddles and iron flies, load into the strategy builder; you edit and run them as your own strategy.
Common iron condor mistakes
- Selling too close for more premium. Short strikes inside half the expected move are tested most weeks.
- Wings so narrow that costs eat the credit. Check the net credit after eight orders of brokerage and slippage.
- A stop above the maximum loss. A stop at twice the credit can never trigger when the wing width is less than that. Set it inside the maximum loss.
- Holding into expiry day for the last few rupees. The final day carries the most gamma and the extra margin.
- Selling the short legs before the wings. It can block much more margin or get the order rejected.
- Ignoring events. One gap on a policy day can wipe out several weeks of credit.
- Trading too many lots because the margin is low. Size by the maximum loss.
Pre-trade checklist
- The expiry, the four strikes and the order of legs are set, wings first.
- The net credit after costs is worth the maximum loss.
- The short strikes sit at the distance or delta your rules require.
- No major event falls before your planned exit.
- The profit target, the stop on the combined premium and the time exit are entered.
- The daily MTM limit for the account is set.
- The strategy has been backtested with costs and paper traded.
- The position size is based on the maximum loss you can accept.
Frequently asked questions
Is an iron condor profitable?
It can be, but not reliably. The condor collects a small, frequent profit and takes occasional larger losses, so the result depends on the exits and on how often the market moves more than the options implied. SEBI's study of FY26 found that 87.7% of individual F&O traders lost money. Backtest the rules with costs and paper trade them before risking capital.
Is an iron condor a good strategy for beginners?
It is a reasonable first selling strategy because the loss is defined before you enter. It still has four legs, slippage and timing to manage. Start with one lot, fixed rules and paper trading.
How much can an iron condor lose?
The most it can lose is the wing width minus the credit, times the lot size. In the example, (250 − 139.25) × 65 = ₹7,199 a lot, plus costs. A gap beyond a wing realises the full amount.
How much margin does an iron condor need?
For one lot of Nifty, roughly ₹40,000 to ₹60,000 in normal conditions, much less than naked short options. Short index options need an extra 2% extreme loss margin on expiry day. Your broker's calculator gives the exact figure.
What is the best time to enter an iron condor?
There is no single best time. Many Nifty sellers enter 4 to 10 days before the weekly expiry, after the opening minutes, and avoid weeks with major events. Backtest the entry day and time with your own rules.
What delta should the short strikes have?
Short deltas of about 0.15 to 0.30 are common for weekly condors. Lower deltas win more often but collect less; higher deltas collect more and are tested more often.
What is the difference between an iron condor and an iron fly?
An iron fly sells both short options at the same strike, at the money, and buys wings on either side. It collects more premium and has a smaller maximum loss, but needs the index to finish very close to the strike. An iron condor has a wider profit zone and a smaller credit.
Can I run an iron condor with an algo under SEBI's rules?
Yes, for retail traders, when orders go through a SEBI-registered broker under the retail algo framework that has applied in full since 1 April 2026. Strategies carry an exchange-assigned Algo ID, and brokers keep a kill switch. The rules govern how orders are sent, not which strategies you may trade.
Related guides and terms
- Iron fly strategy and short strangle strategy
- Bull put spread strategy and bear call spread strategy, the two halves of the condor
- Option selling strategies and options risk management
- Option greeks and strike price selection
- Hedge margin benefit and the F&O margin calculator
- Option profit calculator and how to place stop loss order
- Terms: Theta meaning, vega meaning, gamma meaning, premium meaning, expiry meaning, hedging meaning
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Sources
- Black, F. and Scholes, M. (1973). The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81(3), 637–654
- SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132: Measures to strengthen the equity index derivatives framework, 1 Oct 2024 (expiry-day extreme loss margin, one weekly expiry per exchange)
- SEBI circular on safer participation of retail investors in algorithmic trading, 4 Feb 2025, and the implementation timeline to 1 April 2026
- NSE: Equity derivatives contract specifications (lot sizes and expiry days)
- SEBI, Profitability of Individual Traders in the Equity Derivatives Segment (FY25–FY26), PR No. 50/2026, 20 August 2026