Reverse Iron Condor
Also known as: Long Iron Condor
Expecting a large move in either direction outside the inner strikes — the defined-risk version of a long strangle at lower cost
Risk Profile at a Glance
How to Construct the Reverse Iron Condor
- 1.Buy 1 OTM put at strike B
- 2.Sell 1 put at strike A (lower)
- 3.Buy 1 OTM call at strike C
- 4.Sell 1 call at strike D (higher)
- 5.All same expiration
- 6.Net debit
Understanding the Reverse Iron Condor
The reverse iron condor buys the inner OTM options and sells the outer wings, paying a net debit. It profits when the stock breaks outside either inner strike by expiration. Maximum profit is the inner spread width minus the debit, achieved when the stock is beyond either outer strike. Maximum loss is the debit paid when the stock stays between the inner strikes.
This is the defined-risk version of the long strangle — you want movement, not stability. The reverse iron condor costs less than a long strangle (the sold wings reduce the net debit) but also caps the maximum gain. It is used ahead of binary events when you expect a large move but want to reduce the premium at risk. Compared to the long straddle or long strangle, the reverse iron condor has a lower cost but requires the stock to move beyond the inner strikes rather than just past the breakeven.
In EdgeOS terms, when a stock is coiling at tight extension with no count activity, a reverse iron condor targeting the ATR levels as inner strikes captures the expected breakout range..
When to Use It — EdgeOS Signal Integration
- ✓Use when a bull or bear count approaches 9 — exhaustion signals a large pending move
- ✓Tight extension score (below 0.4) after a long consolidation — breakout imminent
- ✓High VIX with low IV term structure suggests realized volatility may exceed implied
Compare with Similar Strategies
Other Condors Strategies
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Frequently Asked Questions
What is the Reverse Iron Condor options strategy?
The reverse iron condor buys the inner OTM options and sells the outer wings, paying a net debit. It profits when the stock breaks outside either inner strike by expiration.
When should I use the Reverse Iron Condor?
Expecting a large move in either direction outside the inner strikes — the defined-risk version of a long strangle at lower cost
What is the maximum loss on the Reverse Iron Condor?
The maximum loss is fully defined at entry: the net debit paid (for debit strategies) or the spread width minus the credit received (for credit spreads). You can never lose more than this amount.
How does the Reverse Iron Condor compare to similar strategies?
The Reverse Iron Condor is a directional debit strategy. Compared to the Long Strangle (directional, debit), the Reverse Iron Condor has limited max risk and limited max reward. Your choice depends on your directional bias, IV environment, and risk tolerance. The TraderValue strategy comparison tool lets you see the exact payoff differences side by side.