An Iron Condor is an Options Trading strategy that consists of four different options with four different strike prices. This is what's known as a four-legged spread. A Trader buys and sells a call spread at different strikes, then buys or sells a put spread at different strikes. Whether they buy or sell the spreads depends on whether they are buying or selling an IC.
Which brings us to the point that you can either buy or sell an Iron Condor...
A Trader will buy an Iron Condor when they think the stock will trade outside of a specified range. To do this, a Trader must sell the low Put strike, buy the high Put strike, buy the low Call strike, sell the high Call strike. A breakdown tells us this is a Bearish Put Spread and Bullish Call Spread combined together to make a Long IC.
It is far more typical for Traders to sell Iron Condors, which allow a Trader to profit when a stock stays in a specified range (trends sideways). To do this, a Trader must buy the low Put strike, sell the high Put strike, sell the low Call strike, buy the high Call strike. A breakdown tells us this is a Bullish Put Spread and Bearish Call Spread combined together to make a Short IC.
If you hear people complaining about a sideways market stating "This market is awful You can't make money in a sideways market." You can quickly correct them stating the fact that selling an Iron Condor is one of several Options strategies that allow profit off a sideways trend.
Back to the point at hand. An Iron Condor has limited gains and losses. Keep in mind retail Trader's should take the commissions into consideration before entering an Iron Condor. Four-legged spreads can get expensive fast unless you have special pricing for Options Trading.
Here's a look at an IC sold by TickerTank's own Nick Fenton:
Related terms used in Options Trading: VIX, VXN, VXD, Vertical, Calendar Spread, Call, Put,