Iron condor

A four-option position that profits if the stock stays inside a range.

Definition

It combines a bull put spread below the market and a bear call spread above it, collecting a net premium. The maximum gain is the credit received, kept if price finishes between the short strikes. The maximum loss is the strike width minus the credit.

Watch out for

A large move in either direction produces the maximum loss, and the position needs close management near expiration.

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