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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.

Max GainCapped — (Strike B − Strike A) − Net debit
Max LossNet Debit Paid
Break-evenLong put strike − Net debit, and long call strike + Net debit
TypeSmall net debit
Ideal IV environmentLow IV (IV Rank ≤ 25) — you pay cheap premium and profit from a volatility expansion

Profit / Loss Diagram

Reverse Iron Condor at expiration

Long Put Short Put Short Call Long Call Ganancia (down) Ganancia (up) Pérdida (centro estático)

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

ActionInstrumentStrikeExpirationExample
SELL1 PutLower OTM (A)30-45 DTE-1 SPY 430 Put
BUY1 PutNear the money (B)Same expiry+1 SPY 445 Put
BUY1 CallNear the money (C)Same expiry+1 SPY 455 Call
SELL1 CallHigher 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

δDelta — Neutral

The symmetric structure produces a delta close to zero at entry.

θTheta — Negative

Long volatility: time works against you every day. Waiting for the move costs theta.

νVega — Positive

Benefits from rising IV — additional gain if volatility increases before expiration.

γGamma — Positive

A long-gamma position: gains accelerate with a fast move in either direction.

Position Management

  1. 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.
  2. 02
    Close Immediately Post-Event Regardless of profit or loss, close within the first 30 minutes after the event to avoid IV crush.
  3. 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.

Frequently Asked Questions

When should this structure be opened?
Ahead of a catalyst capable of producing a strong move of unknown direction, with implied volatility low. You buy the inner options and sell the outer wings, producing a capped net debit.
What is its main risk?
That the underlying finishes between the two long strikes, where the full debit is lost. It is the statistically most likely outcome, so the structure needs the actual move to exceed what the market had already priced.
How is it managed before expiration?
By closing as soon as the expected move happens, without waiting for expiration. Time decay erodes the position every day price fails to move.
Which strategy is it most often confused with?
The ordinary iron condor, of which it is the mirror image. Always check the direction of each leg: if you buy the wings and sell the inner strikes, what you have is a standard iron condor, not its inverse.