![]() One of the practical advantages of an iron condor over a single vertical spread (a put spread or call spread), is that the initial and maintenance margin requirements for the iron condor are often the same as the margin requirements for a single vertical spread, yet the iron condor offers the profit potential of two net credit premiums instead of only one. Because the long, plain Condor (and Butterfly) combine a debit spread with a credit spread, that overall position is instead entered at a net debit (though usually small). The combination of these two credit spreads makes the long iron condor (and the long iron butterfly) a credit spread, despite the fact that it is "long." This distinguishes the position from a plain Condor position (and the plain Butterfly), which would be constructed with all calls or all puts, by combining either a bull call spread with a bear call spread or a bull put spread with a bear put spread. ![]() The word iron in the name of this position indicates that, like an iron butterfly, this position is constructed using both calls and puts, by combining a bull put spread with a bear call spread. Traders often refer to the inner options collectively as the "body" and the outer options as the "wings". The position is so named because of the shape of the profit/loss graph, which replicates that of a condor but with a different combination of options. ![]() The converse produces a short iron condor. A long iron condor is essentially selling both sides of the underlying instrument by simultaneously shorting the same number of calls and puts, then covering each position with the purchase of further out of the money call(s) and put(s) respectively. The iron condor is an options trading strategy utilizing two vertical spreads – a put spread and a call spread with the same expiration and four different strikes.
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