Iron condors, measured

What an iron condor is

An iron condor is two credit spreads sold on the same day: a put credit spread below the market and a call credit spread above it. You collect two premiums and keep them all if the underlying finishes between the two short strikes at expiry. Your worst case is the width of one spread minus the total credit, because the price can only break out on one side.

That last point is why the condor is popular. It collects more premium than either spread alone for roughly the same collateral, and it does not need you to guess a direction. It is a bet that the underlying stays inside a range for the life of the trade.

Why the win rate misleads

A condor has two ways to lose. A put credit spread on its own only loses when the market falls through the short put; a condor also loses when the market rallies through the short call. In a replay of 25-delta index condors held to expiry, a short strike was touched on about half of all entries, against about a fifth for the put spread alone on the same days.

So the condor wins less often than the put spread inside it, even though it collects more. Across nine structures priced on the same entry days, the condor won 62% of the time against 86% for the put credit spread alone, and the per-entry return on the dollars at risk was slightly negative.

What the history says

The condor is the sum of its two halves, and the two halves did not perform alike. On the index tape we replayed, the put side was positive and the call side was negative: short upside lost money because index funds drifted up more often than the calls priced in. Adding the call spread to a put spread mostly added the call spread's loss.

On a denser 30 to 45 day sample of SPY and QQQ condors, the average was negative on both tickers, at about -0.6% and -1.7% on collateral per trade. Same-day expiry condors on SPX fared no better once real bid and ask prices and fees were counted. The one condor cell that cleared zero was a very short weekend hold, and on a small sample.

When the structure makes sense

The condor is a range bet. It earns when the underlying moves less than the options implied in both directions. In a market that trends, one side of the trade is fighting the trend for the whole hold. That is why it tends to look best on short backtests of a quiet, sideways period and worse on long samples that include rallies.

If you test one, judge each half separately before judging the whole, and compare it against the put spread alone on the same days. If the call side is negative on its own, the condor is a put spread with a drag attached. Sizing still applies: the max loss of one side is the number to size on, not the credit.

How it connects to the rest

The guides on put credit spreads and call credit spreads cover each half in detail. The guide on backtesting options honestly explains why same-day comparisons and real bid and ask fills matter so much here: at the midpoint a condor collects two extra half-spreads it would never see.