Advanced Trading: Choosing Your Iron Condor Strike Price

Consider option delta as one way to narrow the mathematical range when choosing an iron condor strike price. an iron condor strike price
3 min read
Photo by

Iron condors are advanced options trades designed as an income strategy. The objective is straightforward once you determine your desired strike price. But finding those strikes take a bit of finesse.

You could close your eyes and throw a dart. Or, you could take a little bit of Goldilocks wisdom, sprinkle in some trader math, and come up with potential strikes that aren’t too close or too far away. Option delta is one tool used to approximate this range.

Review Time

If you’re not familiar with the iron condor trade, it’s created by selling an out-of-the-money (OTM) vertical call spread along with an OTM vertical put spread. The goal, ideally, is that both spreads will expire worthless at expiration so that you pocket the total options credit, less transaction costs.

Here’s a simple example using a stock trading at $50:

  • Sell the 55–60 call spread for a 25-cent credit
  • Sell the 45–40 put spread for a 25-cent credit

The short strike for the call spread is $5 higher than the stock price, with the short strike for the put $5 lower. The net credit for the iron condor is 50 cents, less transaction costs. As long as the stock stays below $55 at expiration, the call spread expires worthless. And if the stock also remains above $45, then the put spread expires worthless, too. That’s the best-case scenario (see figure 1).

Choosing a strike price for an iron condor options trade

FIGURE 1: PROFIT/LOSS GRAPH. The profit/loss graph of an iron condor created from selling the 55–60 call spread and the 45–40 put spread, for a net credit of $0.50, with the stock at $50. For illustrative purposes only. Past performance does not guarantee future results.

Stocks Don’t Always Play Nice

The problem, of course, is when the stock doesn’t cooperate, and that’s where strike selection comes into play. When the stock moves beyond the short strike of either spread, then that spread has value at expiration. The losses continue as the stock moves all the way to the long strike.

In this example, the loss for one iron condor could reach $450, plus transaction costs. That’s calculated by taking the $5 difference between the strikes (of either the call or the put spread), and then subtracting the total credit of $0.50.

It would seem, then, that the best way to avoid a losing trade is by selling the spreads as far out of the money as possible. But that would mean collecting such pitiful credits that it wouldn’t be worth the effort. Choose strikes too close to where the stock’s trading, and you risk the stock going beyond the short strike, even though collecting the inherently bigger credit is tempting.

Be Picky

So, how do you decide which strikes to sell? Options have probabilities built into their prices, which is where delta comes in. If you take the strike prices of the call and the put where both have a delta around 16, you’ve found what may be the far end of the expected range for that expiration period.

This can be one approach for selecting the strikes for your iron condor. The 16-delta call marks the high end of the expected range. The 16-delta put marks the low end. Using the strikes of these options gives you one example of a mathematically based rationale for choosing your iron condor strike price.

And that might be better than throwing darts.

That’s not to say the trade can’t lose. Of course it can. But, by taking into account the expected range, you might just come up with strikes to consider for right now.


Do Not Sell or Share My Personal Information

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

Iron condors, spreads, and other multiple-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return.  These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades.


Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. © 2024 Charles Schwab & Co. Inc. All rights reserved.

Scroll to Top