Course 1 of 3 · Basic

Iron Condors — Basic Course

Foundations of a neutral, defined-risk options strategy. Work through every module, then take the exam at the bottom of the page to earn your certificate.

By the End of This Course You Will Be Able To

Speak the languageDefine calls, puts, strike, premium, and expiration with confidence.

Read moneynessTell in-, at-, and out-of-the-money apart and know why it matters.

Understand spreadsExplain vertical spreads and the difference between credit and debit.

Build a condorAssemble the four legs of an Iron Condor in the correct strike order.

Do the mathCalculate max profit, max loss, and both break-even points.

Know the setupIdentify the market conditions where an Iron Condor makes sense.

Options Fundamentals

The two building blocks every strategy is made of: calls and puts.

Module 1 · Lesson 1

What Is an Option?

An option is a contract that gives the buyer the right — but not the obligation — to buy or sell 100 shares of a stock at a set price before a set date. The seller takes on the obligation in exchange for a payment called the premium.

Call Option

The right to BUY at the strike price
Buyers profit when the stock rises above the strike
Think: bullish — betting the price goes up
Max loss for the buyer is the premium paid

Put Option

The right to SELL at the strike price
Buyers profit when the stock falls below the strike
Think: bearish — betting the price goes down
Max loss for the buyer is the premium paid

Key idea: An Iron Condor is built by selling options to collect premium — so understanding both sides is essential.

Module 1 · Lesson 2

The Terms You Must Know

Strike PriceThe agreed price at which the option can be exercised.
ExpirationThe date the contract ends. Iron Condors use one shared expiry across all four legs.
PremiumThe price of the option — what the buyer pays and the seller collects.
In / At / Out of the MoneyWhere the stock sits vs. the strike. Sold condor legs always start out-of-the-money.
Time Decay (Theta)Options lose value as expiration nears — a tailwind for sellers and a headwind for buyers.
Implied Volatility (IV)The market's expectation of movement. Higher IV means richer premium for the seller to collect.

Spreads: The Building Blocks

Combine two options into one position to define your risk and reward.

Module 2 · Lesson 1

Vertical Spreads: Credit vs. Debit

A vertical spread buys one option and sells another of the same type and expiration at different strikes. This caps both your profit and your loss. An Iron Condor is simply two credit spreads combined.

Credit Spread

You collect premium up front
Sell the nearer option, buy a cheaper one further out
Profits from time decay and falling volatility
Best when IV is elevated — sell expensive options
The engine of the Iron Condor

Debit Spread

You pay premium up front
Buy the nearer option, sell a cheaper one further out
Profits from a directional move in your favor
Best when IV is low — options are cheaper to buy
Not used to build a condor — shown for contrast

Remember: Iron Condor = a put credit spread below the price + a call credit spread above it.

The Iron Condor

Four legs, one range, defined risk — assembled and explained.

Module 3 · Lesson 1

What Is an Iron Condor?

An Iron Condor is a neutral, defined-risk strategy. You sell an out-of-the-money put spread and an out-of-the-money call spread on the same stock and expiration, collecting a net credit.

Market View

Sideways / range-bound

No strong direction expected

You Collect

A net credit up front

Kept in full if price stays in range

Your Risk

Capped and known

Set before you enter the trade

Why the name: The payoff chart's flat top and two wings resemble a condor's wingspan — hence "Iron Condor."

Module 3 · Lesson 2

The Four Legs, In Order

From lowest strike to highest, an Iron Condor is always built the same way. Sell the inner strikes to collect credit; buy the outer strikes to cap your risk.

#	Leg	Action	Role	Example Strike
1	Long Put	BUY	Lower wing — caps downside risk	$90
2	Short Put	SELL	Bottom of your range — collects premium	$95
3	Short Call	SELL	Top of your range — collects premium	$105
4	Long Call	BUY	Upper wing — caps upside risk	$110

Module 3 · Lesson 3

The Payoff: Profit Zone & Wings

This is what happens at expiration for a condor with a $2.00 net credit and $5 wings on a $100 stock (short strikes at $95 and $105):

Profit / Loss at Expiration — Stock Price Along the Bottom

MAX LOSS
−$300

Ramp
up

PROFIT ZONE
$95–$105
Keep full +$200

Ramp
down

MAX LOSS
−$300

$85 · $90 $93 B/E $95 – $105 (profit zone) $107 B/E $110 · $115

Profit Zone

$95 – $105

Price stays between short strikes → keep full credit

Break-Even

$93 and $107

Credit exactly offsets the loss — finish flat

Loss Zone

Below $90 / above $110

Big move past a wing → capped maximum loss

Module 3 · Lesson 4

The Math: Profit, Loss & Break-Evens

A worked example on a $100 stock. One contract controls 100 shares. Wing width = $5.

The Setup

Sell $95 put → collect $0.90
Buy $90 put → pay $0.30
Sell $105 call → collect $0.90
Buy $110 call → pay $0.30
Net credit: $1.20

The Results

Max Profit: $120 (credit × 100)
Max Loss: $380 (($5 − $1.20) × 100)
Lower B/E: $93.80 ($95 − $1.20)
Upper B/E: $106.20 ($105 + $1.20)

Max Profit Formula

Credit × 100

$1.20 × 100 = $120

Max Loss Formula

(Width − Credit) × 100

($5.00 − $1.20) × 100 = $380

Break-Even Formula

Short Strike ± Net Credit

$95 − $1.20 = $93.80 / $105 + $1.20 = $106.20

Risk-to-reward here is about 3-to-1 — a common trade-off for a high-probability, range-bound strategy.

Module 3 · Lesson 5

When to Trade an Iron Condor

Ideal: price oscillating between support and resistance with no strong trend and elevated implied volatility.

Sideways outlook: You expect the stock or index to stay range-bound — not trend sharply up or down.
Elevated IV, expected to fall: High implied volatility means richer premium; you profit as it settles.
Time on your side: Roughly 30–45 days to expiration lets time decay (theta) work for you.
Liquid underlyings: Trade index ETFs or large-cap names with tight, liquid options markets.

Module 3 · Lesson 6

Managing the Trade & Staying Safe

Smart Habits

Take profits early — many close at 50% of max profit
Size small — risk only 1–2% of your account per trade
Have an exit plan before you enter the trade
Watch a short strike being tested near expiration
Keep a journal — track every condor to see what works

Common Mistakes

Strikes too close — a narrow range gets breached often
Trading illiquid options with wide bid-ask spreads
Holding losers too long, hoping the price comes back
Ignoring earnings or events inside the trade window
Over-sizing — one bad trade wipes out many winners

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Quick Reference

Key terms at a glance — review before the exam.

Call / Put

Right to buy / right to sell at the strike price.

Premium

Price of the option; the seller's income collected up front.

Credit Spread

Sell-to-open spread that collects premium; profits from time decay.

Iron Condor

Put credit spread below + call credit spread above the current price.

Short Strikes

The sold inner legs that define your profit range.

Long Strikes

The bought outer wings that cap your maximum risk.

Max Profit

Net credit received × 100 per contract.

Max Loss

(Wing width − credit) × 100 per contract.

Break-Even

Short strike ± net credit, on each side of the condor.

Theta

Time decay — value sellers earn each day as expiration approaches.

You've Completed the Basic Course

25 questions · 45-minute time limit · Score 70% or higher to earn your Basic Certificate

Start the Basic Exam →