Long Iron Condor Option Screener

Hi, and welcome to the Options Learning Center. I'm going to show you how to trade long iron condors and use Barchart to get the most out of the strategy.

What is a Long Iron Condor?

The long iron condor is a complex options trading strategy that involves a combination of a bear put and a bull call spread, where the trader buys an out-of-the-money put and call and writes a further out-of-the-money put and call on the same underlying asset with the same expiration date. This trade will result in a net debit. The goal of the long iron condor is to profit from an anticipated rise in volatility. So, the trader wants the underlying asset's price to move significantly in either direction at or before the expiration date.

Long Iron Condor Options Strategy:

• Four Trade Legs: Bear Put + Bull Call Spread
• Goal: Profit From Significant Price Movement
• Net Debit: Paid At Setup Due To Option Purchases
• Ideal Outcome: Significant Price Movement

The maximum profit condition happens when the underlying asset's price either exceeds the short call strike, or trades below the short put strike at expiration. Maximum profit is calculated by subtracting the net debit paid by taking the difference between either the spreads (also known as width). The maximum loss happens if the asset’s price stays between the long strikes at expiration and is limited to the net debit.

• Profit: Asset Price Moves Beyond Short Strikes (Either Direction)
• Max Profit = Width of Spread - Net Debit
• Loss: Asset Price Stays Within Long Strikes
• Max Loss = Net Debit

Trade Examples

Now, let’s use Barchart to break down this strategy.

Screening The Market For Long Iron Condor Trades

To access the Long Iron Condor screener, go to Barchart.com, click on the Options tab, and then click on Long Iron Condor Screener. This will immediately bring you to the Results page, where all likely long iron condor trades that fall within the default criteria are displayed.

The list contains headings for several important details of the trade, such as strike prices, premiums, volatility, and probability of profit—all of which you can click to rearrange from highest to lowest or vice versa.

Now, these details are more than enough to get you started on the long iron condor. However, if you want a more granular scan, you can click the Set Filter tab at the top left corner of the results table, and you will be brought to the filters.

Each option strategy has different default filters, as you can see here, and they are pre-designed to give you a good number of results while balancing risk and reward. Now, if you want to add a filter, you can start typing something in the add a filter field or use the convenient dropdown menu to look for what you’d like. You can also delete filters you don’t want.

Now, I’ll just scroll down to my most important consideration for the trade: the Probability of Profit.

This filter measures the chance the trade expires with even a cent in profit, so it’s a good thing to look out for. The higher the probability of profit, the lower the profit itself, so consider that when you’re trading.

But in this case, I’ll set it to 70%, then click on see results. Again, you can change the arrangement of the results by clicking on their headings. If you want the highest probability of profit, go for it, but for this example, I’ll arrange it from the highest max profit and pick the top one.

And there we have it. I already see a likely candidate here. But before we proceed with the trade details, it’s also important to know how to save your screens for future use. All you have to do is click Save Screener at the top right, then name the screen. If you want results to be sent to your email, you can click on one of these checkboxes for your preferred time. It’s that simple and convenient.

Now, back to the trade.

And here, we have our trade details for this example. Tesla is the underlying asset, trading at $227.20 as of the time of the screen. For the bear put side, you can sell a $205-strike put for $11.10, then buy a long put with a $215 strike for $15.10, resulting in a $4.00 debit.

Next, for the bull call side of the trade, you’d buy a long call with the $235 strike for $19.40, then write a $245-strike call and collect $15.50, resulting in a $3.90 debit. The total debit then will be $7.90. All trades will expire on November 15, 2024, which is 57 days from the time of recording.

We’ll also want to calculate the breakeven points on the trade. For a long iron condor, the breakeven price to the upside is equal to the long call plus the net premium paid. And the breakeven to the downside is equal to the long put minus the net premium paid.

Breakeven Calculation

• Upside: Long call plus premium paid
• Downside: Long put minus premium paid

For this trade, the breakeven points $242.90 on the upside and $207.10 on the downside, with a maximum profit of $2.10. The payout ratio is 0.27 to one, or 27%, and the trade has a 74.1% chance of ending in a profit.

Now that we have all our trade details, let’s break down the potential results for this long iron condor.

Maximum Profit Condition

Let’s say that Tesla reports their earnings and it beats expectations, and the stock’s trading price hits $260 on November 11. That means the trade entered the maximum profit conditions on the upside.

To calculate the profit, take the width of the spread, which is $10, then subtract the net debit paid. That means you’ll get $2.10 profit or $210 for every long iron condor you bought.

$235 - $245 = $10
$10 - $7.90 = $2.10 x 100 = $210

Alternatively, Tesla’s stock price could tank to $200 by expiration, and you’ll get the same profit.

Maximum Loss Condition

However, if Tesla’s price stays between $215 and $235, the trade ends in the maximum loss condition. The maximum loss is the net debit at the start of the trade, which is $7.90 per share or $790 per contract. It is calculated by taking the differences between the premium paid and received for the bear put and bull call.

• Bear Put Debit: $15.10 - $11.10 = $4.00
• Bull Call Debit: $19.40 - $15.50 = $3.90
• Net Debit: $4.00 + $3.90 = $7.90 x 100 = $790

Profit/Loss Across Different Price Points

Here are different profit and loss scenarios for different price points to better understand how this long iron condor trade can turn out. As you can see, as Tesla's stock trading price moves beyond the breakeven points, the trade starts to become profitable. But at these points, the trade starts to lose money, however, losses are limited to the premium paid.

Screening For Long Iron Condors For Specific Assets

Barchart also allows you to search for long iron condors for a specific asset. All you need to do is go to the stock or asset's Price Overview page on Barchart.com. Once there, look for Condor Strategies. Then look for the Long Iron Condor tab. You can click on the dropdown to change the expiration dates or click the screen button to reach the option screener page for a more granular search.

Closing Your Positions Before Expiration

It is always a good idea to close your positions before expiration when using any strategy that requires writing options. For this example, you have two short positions, and if either of them is in the money by expiration, the option will be automatically exercised, or, in your perspective, you will be assigned.

• Close Short Positions Before Expiration
• Avoid Automatic Assignments
• Two Short Positions at Risk

If the short put gets assigned, you end up buying 100 shares of stock for every long iron condor you wrote. If you don't want to keep the shares, you have two choices: sell the stock or exercise the long put. However, exercising the long put loses its extrinsic value if there's still time before expiration, so it's usually better to sell the shares and then sell the long put to keep that value. Just be sure that the trading fees don't outweigh the benefits of this two-step process.

• Assignment Leads To Stock Purchase
• Two Choices: Sell Or Exercise
• Exercising Loses Extrinsic Value
• Watch For Trading Fees

Similarly, if the short call gets assigned, you'll sell 100 shares at the strike price. You can buy 100 shares of the underlying to sell, or you can exercise your long call to cancel this out and potentially gain from the difference, but again, you lose the option's value, and you need to keep an eye out for trading fees.

• Short Call Assignment Sells Shares
• Potentially Gain From Difference
• Watch For Trading Fees

Even if you have every intention of closing the position before expiration, there is still the possibility of early assignment.

Pros and Cons

The long iron condor is a limited-risk strategy, meaning you know what you're getting into at the start of the trade. Profits can also happen upside or downside, giving you a better chance, and are excellent for high-volatility trading scenarios.

Pros:

• Limited Risk
• Profit From Either Direction
• Great For High Volatility

However, long iron condors also present you with limited profits, as they are capped by incorporating protective short options in the trade. Small price movements in the underlying stock will lead to losses. It is also a complex strategy with four trade legs and involves the potential of early assignment. Lastly, long iron condors will have high commissions and trading fee costs.

Cons:

• Limited Profit
• Vulnerable To Small Price Movements
• Complex Strategy
• Risk Of Early Assignment
• High Trading Costs

Conclusion

Long iron condors can be work in market conditions with massive price fluctuations. However, you need to monitor your trade legs and closely consider the trading fees so they don't exceed your profit potential. And don't trade blindly; use every resource and utility at your disposal, including option screeners, to help you decide.

If you need more information, visit the Barchart Options Learning Center, where you can learn more about all the other options trading strategies, how they work, and how to profit from each.