Strategy library · Options income
Iron condor: a range trade with the worst case written down
By Anoop Thomas · Last updated
In short
An iron condor sells an out-of-the-money call and put and buys a further-out call and put as protection, all on the same expiry. You collect a net credit and keep it if the index expires between the short strikes. The maximum loss is the wing width minus the credit, so the worst case is known before you enter. On Nifty it needs far less margin than a naked strangle.
If the short strangle makes you nervous, good. The iron condor is the usual answer: the same short call and short put, plus a cheaper call and put bought further out. The bought options eat part of your premium, but they cap the loss on both sides and, on Nifty, cut the margin by more than half.
It suits traders who want to sell premium with a fixed worst case and who will size by that worst case. Look at the reward-to-risk before anything else: in the example below you risk ₹7,995 to make ₹5,005. That is normal for a condor, and it means the strategy only pays if a clear majority of trades end in profit. That is something to test, not assume.
The rules, step by step
A sensible starting template, not a proven system. Change any number, then test it before trusting it.
- 1
Setup
Nifty options on the nearest weekly expiry (Tuesday, as of November 2026). Short strikes about 300 points from spot, or at roughly 0.15–0.20 delta. Wings 200 points beyond each short strike.
- 2
Entry
At 9:30 am, place all four legs. Buy the wings first, then sell the short strikes, so a failed order never leaves you with naked shorts. Only enter if the net credit is at least a third of the wing width (₹67 on 200-point wings).
- 3
Stop-loss
Exit the whole condor if the cost to buy it back reaches twice the credit received, or if Nifty closes a 15-minute candle beyond either short strike.
- 4
Exit
Take profit when half the credit has been captured, or close all four legs at 3:15 pm on expiry day.
- 5
Position sizing
Size by the defined max loss, not the margin screen. At ₹7,995 per lot, a 2% risk limit means about ₹4 lakh of capital per lot.
- 6
Filters
No entries on Budget or RBI policy days, and none when the available credit is below your minimum.
Say it in plain English
Paste this into INDfolio’s AI strategy builder and it becomes a backtestable strategy.
On Nifty weekly options at 9:30 am, sell the call and the put about 300 points from spot and buy the call and put 200 points further out as protection, buying the protection first. Only enter if the net credit is at least ₹67. Exit everything if the cost to close doubles from the credit, take profit at half the credit, and close all four legs by 3:15 pm on expiry day. Size so one lot’s maximum loss is under 2% of capital.Backtest this free
Free plan · no card · NSE data included
Payoff at expiry: a 23,500/23,700/24,300/24,500 Nifty condor
Hypothetical inputs: Nifty at 24,000. Sell the 24,300 call at ₹70 and buy the 24,500 call at ₹30; sell the 23,700 put at ₹65 and buy the 23,500 put at ₹28. Net credit ₹77 × 65 = ₹5,005. Max loss (200 − 77) × 65 = ₹7,995. Breakevens 23,623 and 24,377.
| Nifty at expiry | Call spread (₹) | Put spread (₹) | Net P&L per lot (₹) |
|---|---|---|---|
| 23,400 | +2,600 | −10,595 | −7,995 |
| 23,550 | +2,600 | −7,345 | −4,745 |
| 23,623 | +2,600 | −2,600 | 0 |
| 24,000 | +2,600 | +2,405 | +5,005 |
| 24,377 | −2,405 | +2,405 | 0 |
| 24,600 | −10,400 | +2,405 | −7,995 |
Illustrative premiums, not quotes and not a backtest; costs and slippage excluded. Lot size 65 as of 2026. Try other strikes and wing widths in the option payoff calculator.
Wing width is the real decision
Narrow wings (100–150 points on Nifty) mean a small max loss and a small credit. Wide wings (300–500 points) bring back more premium but behave more like a naked short strangle, with a bigger loss before the protection starts working. Far out-of-the-money options are cheap, so widening the wings adds a little credit and a lot of max loss. Work out both numbers before you choose.
Margin is the Indian reason condors and iron flies are so popular. Exchanges give a large benefit when short legs are hedged. On Zerodha’s SPAN calculator on 4 November 2026 (Nifty near 23,750, 17 November weekly), a condor with shorts 300 points out and 200-point wings needed about ₹75,000 per lot, against about ₹1.9 lakh for the same strangle without wings. Margin still rises on expiry day because of SEBI’s extra 2% extreme-loss margin on short index options.
Where condors break
A fast move through one short strike is the main way to lose. Defined risk isn’t small risk: the worst case in the example is about 1.6 times the credit, and it can arrive in a single afternoon. Pin risk is the expiry-day version, when Nifty closes near a short strike and it’s unclear which legs finish in the money. The rules close everything by 3:15 pm for that reason.
Holding to the close has a tax cost too. A long option that expires in the money is exercised, and STT is charged on its intrinsic value (0.15% as of November 2026, per Zerodha’s charges page). Squaring off before the close avoids that, along with any settlement surprises.
Eight orders, eight sets of charges
A condor is four orders to open and four to close. At ₹20 per order that’s ₹160 of brokerage for a round trip, plus GST on it. STT is 0.15% of the premium on every sale, including when you sell the wings back. Say you close the example condor at ₹38 net, keeping ₹39 of the ₹77 credit, or ₹2,535 gross. Charges come to roughly ₹215 a lot. Add one point of slippage on each of the eight fills and that’s another ₹520.
Together that is close to 30% of the gross profit gone to frictions on a single lot. Trade more lots and the flat brokerage shrinks as a share; slippage doesn’t. Your broker’s numbers are in the brokerage calculator.
Testing a condor properly
Backtest all four legs from real historical option prices at the times your rules trade. If a tool prices the wings from a volatility model instead, any error there lands straight in your credit and your max loss.
Vary the short-strike distance and the wing width first, the stop multiple after. Read results by month and by volatility regime (India VIX bands are a simple proxy). Be suspicious if the backtest never takes a full max loss, or if every leg fills at the mid price. Run whatever survives through Monte Carlo simulation to see how long a losing run could plausibly get. INDfolio’s options backtester covers the testing side with Indian costs deducted (we build it, so weigh that accordingly).
Educational content, not investment advice. The rules and numbers on this page are an illustrative template, not a backtest result or a recommendation. Derivatives carry a high risk of loss — SEBI’s own studies of F&O traders found that the large majority of individuals lose money. We build INDfolio AI, so weigh our view accordingly.
More from the strategy library
All strategies →Options income
Short Straddle
Sell the ATM call and put, collect both premiums, lose if Nifty moves too far. Includes the 9:20 am straddle rules.
Options income
Short Strangle
Sell an out-of-the-money call and put. Wider breakevens than a straddle, a smaller credit, and the same unlimited loss on a big move.
Options income
Covered Call
Hold a full lot of an F&O stock and sell an out-of-the-money call against it each month. Premium in, upside capped, downside unchanged.
Options directional
Bull Call Spread
Buy a call and sell a higher-strike call. Cheaper than a naked call, with profit and loss both capped. Needs a directional view.
Intraday
Opening Range Breakout
Mark the high and low of the first 15 minutes, trade the break, keep the stop at the other side. Simple to automate, easy to over-trade.
Trend following
Moving Average Crossover
Buy when a fast moving average crosses above a slow one, exit on the cross back. Easy to test, slow to react, hurt by sideways markets.