The Iron Condor is a neutral options strategy that profits when the underlying (typically NIFTY 50 or BANK NIFTY) stays within a defined range until expiry. It involves selling an OTM call spread and an OTM put spread simultaneously — collecting premium from both sides. The maximum profit is the total premium collected. The maximum loss is capped (unlike a naked straddle).
Iron Condor Structure
| Leg | Action | Strike | Purpose |
|---|---|---|---|
| Short Call | Sell | OTM — e.g., NIFTY + 200 points | Collect call premium |
| Long Call | Buy | Further OTM — e.g., NIFTY + 400 points | Cap maximum loss on upside |
| Short Put | Sell | OTM — e.g., NIFTY − 200 points | Collect put premium |
| Long Put | Buy | Further OTM — e.g., NIFTY − 400 points | Cap maximum loss on downside |
P&L Profile
Ideal Market Conditions for Iron Condor on NIFTY
- India VIX above 16 — higher IV means more premium collected
- No major events in the expiry week — avoid RBI meetings, budget days, election results
- NIFTY in a consolidation phase — not in a strong trend (check ADX below 20)
- Weekly expiry cycle — sell on Monday/Tuesday, expire Thursday
Strike Selection Rules
Strike Selection for NIFTY Weekly Iron Condor:
Short strikes: Delta of 0.15–0.20 (approximately 1.5–2 standard deviations OTM)
Long strikes: 100–200 points further OTM from short strikes
Example (NIFTY at 23,500):
— Sell 23,800 CE (roughly +300 OTM) and Buy 24,000 CE
— Sell 23,200 PE (roughly −300 OTM) and Buy 23,000 PE
Target: Collect ₹80–₹120 net premium per condor (50 units per lot)
Short strikes: Delta of 0.15–0.20 (approximately 1.5–2 standard deviations OTM)
Long strikes: 100–200 points further OTM from short strikes
Example (NIFTY at 23,500):
— Sell 23,800 CE (roughly +300 OTM) and Buy 24,000 CE
— Sell 23,200 PE (roughly −300 OTM) and Buy 23,000 PE
Target: Collect ₹80–₹120 net premium per condor (50 units per lot)
Risk Management
Critical rules for Iron Condor safety:
1. Close the threatened side if NIFTY moves within 50 points of a short strike
2. Never let either short strike go deep ITM — take the loss and close
3. Set a stop loss at 2× the premium collected (if you collected ₹100, exit at ₹200 total loss)
4. Never sell condors the week before RBI policy, budget, or election results
1. Close the threatened side if NIFTY moves within 50 points of a short strike
2. Never let either short strike go deep ITM — take the loss and close
3. Set a stop loss at 2× the premium collected (if you collected ₹100, exit at ₹200 total loss)
4. Never sell condors the week before RBI policy, budget, or election results
Backtesting Iron Condors on Momentum IQ
Use the F&O backtesting module (Pro/Quant plan) with these parameters:
- Strategy: Short Strangle / Iron Condor
- Entry: Monday of each weekly expiry
- Exit: Thursday close or stop loss triggered
- Test period: Include 2020 (VIX 85) and 2022 correction to stress-test
- Filter: Only enter when India VIX > 14