Inverse Iron Condor

A long put spread and a long call spread in the same expiration: it opens for a debit and gains when the underlying leaves the range between the two long strikes.

Also called Long iron condor, Reverse iron condor

Outlook

Volatility

Family

Neutral

Level

Intermediate

Legs

4 legs

Expirations

1 expiration

Opens for

Debit

Maximum profit

Limited

Maximum loss

Limited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
B	Long	Put 97.5	1	Delta 30
A	Short	Put 92.5	1	5.00 points further out of the money than B
C	Long	Call 105	1	Delta 30
D	Short	Call 110	1	5.00 points further out of the money than C

What it is

A bear put spread below the price and a bull call spread above it, in the same expiration. Long strikes at B and C, short wings further out at A and D.

It is the iron condor reversed, and equivalently a long strangle with both wings sold to reduce the debit. What the sold wings pay for is a cap on the gain.

The payoff

At expiration

A trough between the long strikes with both ends flat: the full debit is lost between B and C, and the gain is capped beyond the short wings A and D.

• Between B and C — everything expires worthless and the whole debit is lost.
• Between A and B, or between C and D — one long leg is in the money and the result climbs from the maximum loss toward the maximum gain.
• Below A or above D — that side’s spread is worth its full width and the gain stops there.

Maximum gain is the width of the tested side less the debit. Break-evens are B minus the debit and C plus the debit.

How it behaves before expiration

Today, before expiration

Today's value is a shallow curve above the trough, with all four corners rounded.

The trough is shallower before expiry, because all four legs still carry time value. The structure converges on its terminal shape late, which means a move that happens early is not fully paid for until the end.

The Greeks

Delta is near zero in the middle and builds toward whichever long strike the price approaches.

Gamma is positive around B and C and negative around A and D.

Theta is negative and modest — two long legs decay, two short ones offset part of it.

Vega is positive and small.

Where it lives in the volatility environment

Practitioners describe this as a defined-gain way to be long a move: cheaper than a strangle because of the sold wings, and capped for the same reason. It is generally compared with the strangle on the question of whether the expected move would exceed the short wings anyway — beyond them, the extra distance is not paid for.

What can go wrong

• The gain is capped and the debit is not small. The structure has to reach a wing to pay its maximum.
• The dead zone is the whole middle. Anything between B and C loses everything paid.
• Short wings can be assigned early, leaving shares against a three-legged remainder.
• Four legs, eight crossings, and the same wing-liquidity problem as the iron condor.
• It is not a long strangle. A move far beyond a wing adds nothing, which is precisely what the wings were sold for.

Building it in Option Panel

Open Build Strategy and pick Inverse Iron Condor. The two long strikes are selected by delta, percentage, offset or exactly; each short wing is expressed as an offset from its long leg, which fixes the width and therefore the maximum gain.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Iron Condor — the other side of this structure.
• Long Strangle — the same view without the sold wings: a larger debit and no cap.
• Inverse Iron Butterfly — the same idea with both long strikes together.