Iron Condors: Collecting Premium From Both Sides
A short strangle with a floor bolted on
An iron condor is built from four legs: sell a put, buy a further out-of-the-money put below it, sell a call, and buy a further out-of-the-money call above it — all in the same expiration. Strip it down and the core is a short strangle: a short put and a short call, both out of the money, collecting premium on a bet that the stock stays inside a range. The two long options — the bought put and bought call further from spot — aren't there to make money. They're there to cap the loss if the stock breaks out of that range in either direction. That's the entire structure: a premium-selling bet on a range, with the tail risk paid off in advance.
Two credit spreads, not one four-legged mystery
The cleanest way to think about an iron condor is as two independent vertical credit spreads stacked on opposite sides of spot: a bear call spread above the stock and a bull put spread below it. Each spread has its own max profit (the credit collected) and its own max loss (the width between its two strikes, minus that credit). Since both spreads can't be tested at the same time — the stock can only be above spot or below it at expiration, not both — the max loss on the whole position is just the larger of the two individual spread widths minus the total credit received, not the sum of both. For the actual mechanics of how one of those spreads prices out, see vertical spreads explained.
Width and distance are two separate dials
Setting up a condor means choosing two things independently: how far the short strikes sit from spot (distance) and how far the long strikes sit from the short strikes (width). Pushing the short strikes further from spot lowers the probability the stock ever reaches them, but it also shrinks the credit collected, since those strikes carry less extrinsic value to begin with. Widening the gap between short and long strikes raises the max loss but also raises the credit, because the long option purchased further out is cheaper and drags less premium off the short strike. There's no single "correct" width — a narrow condor behaves more like a bet on a specific range with tight risk, while a wide one behaves more like a short strangle that happens to have a loss cap far away.
What actually threatens the trade
A condor's max profit is realized if the stock simply sits between the two short strikes through expiration — the position is short vega and short gamma, so it wants low realized volatility and, generally, falling implied volatility after entry. The real threat isn't a slow drift toward one side; it's a fast move that reaches or blows through a short strike before expiration, which does two things at once: it starts eating into the credit on that side, and it raises the delta and gamma exposure of that spread sharply, since the short leg is now near or in the money. This is the same gamma-acceleration dynamic that makes any short option position riskier near the strike as expiration approaches — see why theta decay isn't a straight line for how that curve bends late in the trade.
Where the credit actually comes from
Because equity index and most single-stock skew tends to price OTM puts richer than OTM calls of equal distance from spot, the put side of a condor often contributes more credit than the call side at symmetric strike distances — a direct consequence of the skew shape covered in why OTM puts almost always cost more than OTM calls. Traders sometimes widen the call side or narrow the put side to account for this asymmetry rather than mirroring the strikes exactly. Before placing any condor, it's worth comparing the total credit against the width being risked and against how far the current implied move actually prices the stock to travel — the option chain in the OptionScope workspace lays out live strikes, credit, and IV side by side for exactly that comparison.