Reverse Iron Condor
The inverse of the Iron Condor — combines a bear put spread with a bull call spread to profit from a strong move in either direction, with capped risk and reward.
Profit / Loss Diagram
Reverse Iron Condor at expiration
What is this strategy?
The Reverse Iron Condor — also called a <strong>Long Iron Condor</strong> — is the mirror image of the traditional Iron Condor: instead of selling the inner strikes and buying the outer ones, you do the opposite. You buy a bull call spread (long inner call, short outer call) and a bear put spread (long inner put, short outer put). It is a <em>long volatility</em> strategy.
The result: maximum gain if price moves outside the range between the inner long strikes, maximum loss if it stays in the centre. It is an alternative to a Long Straddle or Strangle with more limited cost and reward — ideal when a straddle is prohibitively expensive because implied volatility is high.
The Reverse Iron Condor suits betting on a strong directionless move — earnings, regulatory decisions, major macro events. Its main advantage over a straddle is a maximum loss defined and capped at the debit paid. The disadvantage is that maximum gain is also capped, so it does not fully capture extreme moves.
Construction
| Action | Instrument | Strike | Expiration | Example |
|---|---|---|---|---|
| SELL | 1 Put | Lower OTM (A) | 30-45 DTE | -1 SPY 430 Put |
| BUY | 1 Put | Near the money (B) | Same expiry | +1 SPY 445 Put |
| BUY | 1 Call | Near the money (C) | Same expiry | +1 SPY 455 Call |
| SELL | 1 Call | Higher OTM (D) | Same expiry | -1 SPY 470 Call |
Example
SPY at $450, 30 DTE. You expect a move greater than $15 in either direction from an upcoming catalyst. You build a Reverse Iron Condor 430/445/455/470: selling the outer wings and buying the inner ones.
- Put Sold (430) -1 SPY 430 Put @ $1.50 (credit)
- Put Purchased (445) +1 SPY 445 Put @ $5.00 (debit)
- Call Purchased (455) +1 SPY 455 Call @ $5.00 (debit)
- Call Sold (470) -1 SPY 470 Call @ $1.50 (credit)
- Net Debit $700 — (5.00 + 5.00 − 1.50 − 1.50) × 100
- Maximum Gain $800 — (445 − 430) × 100 − 700, with SPY below $430 or above $470
- Maximum Loss $700 — the debit, with SPY between $445 and $455 at expiration
- Breakevens $438 (445 − 7.00) and $462 (455 + 7.00)
The Greeks
The symmetric structure produces a delta close to zero at entry.
Long volatility: time works against you every day. Waiting for the move costs theta.
Benefits from rising IV — additional gain if volatility increases before expiration.
A long-gamma position: gains accelerate with a fast move in either direction.
Position Management
- 01 Enter 5–10 Days Pre-Event Buy before IV inflates further. The IV curve typically rises exponentially in the final 48 hours before an event.
- 02 Close Immediately Post-Event Regardless of profit or loss, close within the first 30 minutes after the event to avoid IV crush.
- 03 Keep Strikes Near Spot For maximum gamma sensitivity, the inner long strikes should sit close to the current price. Wings 5–10% out of the money are typical.