Iron Condor

Cost Components:

• Put spread credit: Received
• Call spread credit: Received
• Net credit = Total received (keep if stock stays in range)
• Max risk = Wing width - Net credit
• Transaction costs: ~$0.65 per contract × 4 legs = $2.60

Quick Start

Calculate iron condor metrics:

from scripts.iron_condor_calculator import IronCondor

# Example: SPY at $450, expect to stay $440-$460
position = IronCondor(
    underlying_price=450.00,
    short_put=440.00,     # Sell $440 put
    long_put=435.00,      # Buy $435 put ($5 wide)
    short_call=460.00,    # Sell $460 call
    long_call=465.00,     # Buy $465 call ($5 wide)
    put_spread_credit=0.75,
    call_spread_credit=0.80,
    contracts=1
)

# Key metrics
print(f"Net Credit: ${position.net_credit:.2f}")
print(f"Max Profit: ${position.max_profit:.2f}")
print(f"Max Loss: ${position.max_loss:.2f}")
print(f"Breakevens: ${position.lower_breakeven:.2f} - ${position.upper_breakeven:.2f}")
print(f"Profit Zone: {position.profit_zone_width:.0f} points")

Core Workflow

1. Identify Range-Bound Opportunity

Look for stocks likely to trade sideways:

Ideal Scenarios:

• Post-Earnings Consolidation: Stock settles after earnings volatility
• Technical Range: Trading between support/resistance
• High IV Crush Candidate: Elevated IV likely to contract
• Sideways Trend: Lack of directional catalyst
• Index Products: SPY, QQQ during low-volatility periods

Market Conditions:

• IV rank >50 (premium rich environment)
• Recent volatility > Expected future volatility
• Clear support/resistance levels
• No major catalysts upcoming
• Historical range-bound behavior

See references/range-identification.md.

2. Wing Width Selection

Narrow Wings ($2.50-$5):

• Lower max risk ($250-$500 per contract)
• Lower credit collected (~$0.50-$1.50)
• Better risk/reward ratio (often 3:1 or better)
• Easier to manage (less capital at risk)
• Example: $440/$445 put spread + $455/$460 call spread

Standard Wings ($5-$10):

• Moderate max risk ($500-$1,000 per contract)
• Moderate credit (~$1.00-$2.50)
• Balanced approach (most common)
• Example: $435/$445 put spread + $455/$465 call spread

Wide Wings ($10-$20):

• Higher max risk ($1,000-$2,000 per contract)
• Higher credit (~$2.50-$5.00)
• Lower R:R ratio (often <2:1)
• More capital intensive
• Example: $430/$450 put spread + $450/$470 call spread

Selection Criteria:

• Match wing width to risk tolerance
• Wider wings = more credit but worse R:R
• Target R:R ratio: 3:1 or better (credit:risk)

See references/wing-width-selection.md.

3. Strike Placement Framework

Delta-Based Approach (Most Common):

Conservative (Wide profit zone):

• Short put: ~-0.10 delta (10% OTM)
• Short call: ~0.10 delta (10% OTM)
• Probability of profit: ~80%
• Example: Stock $100 → Short $90 put / Short $110 call

Standard (Balanced):

• Short put: ~-0.20 delta (7-8% OTM)
• Short call: ~0.20 delta (7-8% OTM)
• Probability of profit: ~70%
• Example: Stock $100 → Short $92 put / Short $108 call

Aggressive (Narrow profit zone):

• Short put: ~-0.30 delta (5% OTM)
• Short call: ~0.30 delta (5% OTM)
• Probability of profit: ~60%
• Higher credit, tighter range
• Example: Stock $100 → Short $95 put / Short $105 call

See references/strike-placement-guide.md.

4. Profit Zone Optimization

Compare different strike configurations:

from scripts.condor_optimizer import optimize_profit_zone

configs = optimize_profit_zone(
    underlying_price=450.00,
    short_deltas=[0.10, 0.15, 0.20, 0.25, 0.30],
    wing_width=5.00,
    volatility=0.22,
    days_to_expiration=45
)

for config in configs:
    print(f"Delta {config['short_delta']:.2f}:")
    print(f"  Profit Zone: ${config['lower_short']:.2f} - ${config['upper_short']:.2f}")
    print(f"  Zone Width: {config['zone_width']:.0f} points ({config['zone_pct']:.1f}%)")
    print(f"  Credit: ${config['net_credit']:.2f}")
    print(f"  Max Risk: ${config['max_risk']:.2f}")
    print(f"  R:R Ratio: {config['rr_ratio']:.2f}:1")

See references/profit-zone-optimization.md.

5. IV Rank and Premium Analysis

Assess volatility environment:

from scripts.iv_analyzer import analyze_iv_for_condor

analysis = analyze_iv_for_condor(
    symbol='SPY',
    current_iv=0.22,
    lookback_period=252
)

print(f"IV Rank: {analysis['iv_rank']:.0f}")
print(f"IV Percentile: {analysis['iv_percentile']:.0f}")
print(f"Premium Rich: {analysis['is_premium_rich']}")
print(f"IV Crush Likely: {analysis['iv_crush_likely']}")
print(f"Optimal for Condor: {analysis['condor_optimal']}")

Ideal IV Environment:

• IV Rank: 50-90 (elevated premiums)
• IV Percentile: 60-90
• Recent IV spike (likely to contract)
• No major catalysts ahead (avoid IV expansion)

⚠️ Avoid when IV rank <30 (insufficient premium)

See references/iv-analysis.md.

6. Expiration Cycle Selection

Short-Term Condors (21-30 days):

• Faster theta decay benefit
• Less time for stock to breach
• More active management required
• Higher annualized return potential
• Best for: Active traders, high-probability setups

Standard Condors (30-45 days):

• Balanced theta and time
• Industry standard (most common)
• Moderate management
• Sweet spot for theta/gamma balance
• Best for: Most traders, most conditions

Long-Term Condors (45-60 days):

• Slower theta decay
• More time for adjustments
• Lower theta benefit
• More forgiving
• Best for: Less active traders, wider ranges

See references/expiration-selection.md.

7. Greeks Monitoring

Track condor Greeks:

from scripts.greeks_calculator import calculate_condor_greeks

greeks = calculate_condor_greeks(
    short_put=440.00,
    long_put=435.00,
    short_call=460.00,
    long_call=465.00,
    underlying_price=450.00,
    volatility=0.22,
    time_to_expiration=45/365
)

print(f"Delta: {greeks['delta']:.3f}")    # ~0 (neutral)
print(f"Gamma: {greeks['gamma']:.3f}")    # Negative (position speeds up outside range)
print(f"Theta: {greeks['theta']:.3f}")    # Positive (earns decay)
print(f"Vega: {greeks['vega']:.3f}")      # Negative (benefits from IV drop)

Key Insights:

• Delta: Near zero (directionally neutral)
• Gamma: Negative (accelerates against you outside range)
• Theta: Positive (earns time decay daily)
• Vega: Negative (benefits from IV contraction)

See references/greeks-guide.md.

8. Position Sizing

Calculate risk-appropriate contracts:

from scripts/position_sizer import calculate_condor_size

contracts = calculate_condor_size(
    portfolio_value=100000,
    risk_per_trade=0.02,      # 2% max risk
    max_loss_per_condor=345   # Wing width $5 - Credit $1.55
)
# Returns: 5 contracts (max risk $1,725 = 1.73%)

Sizing Guidelines:

• Risk 1-3% of portfolio per condor
• Account for max loss (wing width - credit)
• Consider deploying multiple condors at different ranges
• Leave room for adjustments

See references/position-sizing.md.

9. Entry Execution

Order Types:

• Iron Condor Order: Single order for all 4 legs (best execution)
• Credit Limit Order: Set minimum net credit willing to accept
• Separate Spreads: Enter put spread and call spread separately (suboptimal)

Best Practices:

• Always enter as iron condor order (one ticket)
• Set limit at mid-point of condor bid/ask
• Adjust by $0.05-$0.10 if not filled
• Verify equal wing widths before sending
• Confirm credit received (not debit)

Entry Timing:

• Enter when IV rank >50
• After volatility spike (IV likely to contract)
• Avoid day before earnings/events
• Best: 30-45 days to expiration

10. Management and Adjustments

Profit Taking:

• 50% max profit: Standard target (close at 50% of credit)
• 21 DTE: Rolling point (close and re-establish if desired)
• 75% max profit: Near optimal, theta slowing

Defensive Adjustments (Stock approaching short strike):

Roll Untested Side:

• Stock moving up: Close call spread, roll to higher strikes
• Stock moving down: Close put spread, roll to lower strikes
• Keep tested side, collect more credit

Convert to Iron Butterfly:

• Close breached spread
• Sell ATM spread on opposite side
• Tightens profit zone but collects credit

Close and Re-establish:

• Accept loss on current condor
• Open new condor at different range
• Fresh premium, reset probabilities

See references/adjustment-strategies.md.

Scripts

Calculator

# Calculate iron condor metrics
python scripts/iron_condor_calculator.py \
  --underlying SPY \
  --price 450 \
  --short-put 440 \
  --long-put 435 \
  --short-call 460 \
  --long-call 465 \
  --put-credit 0.75 \
  --call-credit 0.80

Optimizer

# Optimize profit zone configuration
python scripts/condor_optimizer.py \
  --underlying SPY \
  --price 450 \
  --short-deltas 0.10 0.15 0.20 0.25 0.30 \
  --wing-width 5 \
  --dte 45

IV Analyzer

# Analyze IV environment for condor
python scripts/iv_analyzer.py \
  --symbol SPY \
  --current-iv 0.22 \
  --lookback 252

References

Core Guides

• quickstart-guide.md - 5-minute overview
• installation-guide.md - Setup instructions
• developer-guide.md - Code standards

Strategy-Specific

• range-identification.md - Finding sideways opportunities
• wing-width-selection.md - Choosing spread width
• strike-placement-guide.md - Delta-based framework
• profit-zone-optimization.md - Optimize range
• iv-analysis.md - IV rank, percentile, premium environment
• expiration-selection.md - 21/30/45 day comparison
• greeks-guide.md - Delta, gamma, theta, vega
• position-sizing.md - Risk management
• adjustment-strategies.md - Rolling, defending
• examples.md - Real range-bound setups

Dependencies

Required Packages:

numpy>=1.24.0
pandas>=2.0.0
matplotlib>=3.7.0
scipy>=1.10.0

Installation:

pip install -r requirements.txt

Python Version: 3.11+

Risk Warnings

⚠️ Key Risks:

• Limited Profit: Capped at net credit received
• Undefined Risk (if not managed): Max loss = Wing width - Credit
• Gamma Risk: Position accelerates against you outside range
• Assignment Risk: Short options can be assigned early
• Pin Risk: Stock settling at short strike (complex scenarios)
• Gap Risk: Overnight gaps can breach strikes
• Adjustment Cost: Rolling can be expensive in losses

Risk Mitigation:

• Only trade in high IV environments (IV rank >50)
• Set max loss at 2-3× credit received
• Close early if breached (don't hope)
• Monitor approaching earnings/events
• Use mechanical profit taking (50% rule)
• Size conservatively (1-3% portfolio risk)
• Have adjustment plan before entry

When to Use Iron Condor

✅ Ideal Scenarios:

• Range-bound market (sideways trend)
• High IV environment (IV rank >50)
• Post-earnings consolidation
• No major catalysts upcoming
• Clear support/resistance levels
• Want to collect premium with defined risk
• Comfortable with active management

❌ Avoid When:

• Low IV environment (IV rank <30)
• Trending market (strong directional bias)
• Pre-earnings or major catalyst
• Wide bid/ask spreads (illiquid)
• Can't actively monitor (vacations)
• Uncertain market conditions

Comparison to Other Strategies

vs. Iron Butterfly: Wider profit zone and lower max loss probability, but lower credit.

vs. Long Butterfly: Collect credit vs. pay debit. Benefits from time decay.

vs. Straddle/Strangle: Defined risk with wings. Opposite thesis (want no move vs. big move). Collect premium.

Example Trade

Scenario: SPY at $450, IV rank 72, expect to stay $435-$465 over 45 days

Setup:

• Sell 1 SPY $440 put @ $1.25
• Buy 1 SPY $435 put @ $0.50 (Put spread credit: $0.75)
• Sell 1 SPY $460 call @ $1.30
• Buy 1 SPY $465 call @ $0.50 (Call spread credit: $0.80)
• Net credit: $1.55 × 100 = $155 per condor
• Contracts: 10 condors
• Expiration: 45 days

Risk Profile:

• Max Profit: $155 × 10 = $1,550 (if SPY $440-$460 at expiration)
• Max Loss: ($5 wing - $1.55 credit) × 100 × 10 = $3,450
• Lower Breakeven: $440 - $1.55 = $438.45
• Upper Breakeven: $460 + $1.55 = $461.55
• Profit Zone: $438.45 - $461.55 (23-point range, ±5.1%)
• Risk/Reward: 2.2:1 (excellent)
• Probability of Profit: ~75%

Outcomes: SPY $440-$460 = max profit $1,550; at $461 = breakeven; outside wings = max loss $3,450

Management: Target 50% max profit ($775) or 21 DTE; stop if SPY approaches wings

Version History

v1.0 (2025-12-12)

• Initial release using SKILL_PACKAGE_TEMPLATE v3.0
• Anthropic + Claude Code compliant (<500 lines)
• Progressive disclosure with references/
• Complete condor optimizer and IV analyzer
• Delta-based strike placement framework
• Adjustment strategies and profit zone optimization

Compliance: Anthropic Best Practices ✅ | Claude Code Compatible ✅ Template: SKILL_PACKAGE_TEMPLATE v3.0 Lines: ~490 (under 500-line limit)