The Earnings Iron Condor - Selling the Implied Move With Defined Risk
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Build an earnings iron condor around the implied move and state its maximum profit, maximum loss and break-evens.
An earnings iron condor sells an out-of-the-money put spread and an out-of-the-money call spread in the first expiration after a report, usually with the short strikes near the implied move. It collects the inflated premium and benefits from the IV crush, like a short straddle, but the long wings cap the loss if the stock gaps.
Buying vs Selling Options Before Earnings showed the problem with a short straddle: the upside loss has no limit. The iron condor gives up some premium to buy that limit. Course 3's Iron Condor Explained lesson covers the mechanics in depth; this lesson is about using it around a report.
How do you build an iron condor for earnings?
Four options, all in the same expiration, the first one after the report:
- Sell a put below the stock price, near the lower end of the implied range.
- Buy a put further below it. This is the lower wing.
- Sell a call above the stock price, near the upper end of the implied range.
- Buy a call further above it. This is the upper wing.
The OIC's iron condor guide describes the same structure: a short call spread and a short put spread together, profiting if the stock stays between the short strikes.
Worked example
An XYZ iron condor around an $8.83 implied move
XYZ is at $100 and reports tonight. The 7-day straddle prices a move to about $91.17 or $108.83, so the short strikes go just outside that range, at 90 and 110, with wings $5 wider. Prices are hypothetical Black-Scholes values at 80% implied volatility with a 4.5% rate, no dividends and no skew.
- Buy the 85 put for $0.32.
- Sell the 90 put for $0.95.
- Sell the 110 call for $1.27.
- Buy the 115 call for $0.60.
Net credit: $0.95 + $1.27 - $0.32 - $0.60 = $1.30 per share, or $130 per iron condor.
- Maximum profit: $130, if XYZ finishes between $90 and $110 at expiration.
- Maximum loss: $370, the $5 width of one spread minus the $1.30 credit, times 100, if XYZ finishes at or below $85 or at or above $115.
- Break-evens: $88.70 and $111.30, the short strikes minus and plus the credit.
The trade risks $370 to make $130, about a 35% return on risk if it works.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
XYZ 85/90/110/115 iron condor sold for $1.30, at expiration
Hover or tap the chart, or focus it and use the arrow keys, to read any price.
Open this trade in the free calculatorShow as table
In one sentence each: maximum profit = net credit x 100; maximum loss = (wider spread width - net credit) x 100; break-evens = short put strike - credit and short call strike + credit.
How does an earnings iron condor compare with a short straddle?
The straddle here is a short straddle, with undefined risk. The short call's loss is unlimited, and on the way down the straddle can lose the strike x 100 minus the premium: $9,117 for the XYZ 100 straddle sold for $8.83.
Both collect premium and both win from the crush. Here they are side by side the morning after the report, with implied volatility back to 30% and 6 days left.
The straddle makes more when the stock stays put, because it sold the most expensive options. The condor makes less, but its loss is bounded: by expiration it can never lose more than $370, while the straddle's loss keeps growing with the gap. At $120 the next morning the condor costs about $472 to close (its loss heads to the $370 cap as expiration nears), and the straddle about $2,007.
Cost to close the morning after: iron condor vs short straddle
Iron condor, per contract
Short straddle, per contract
Note the next-morning loss at $115 is smaller than the $370 maximum: the wings still have some value with 6 days left. That cushion shrinks as expiration approaches.
These prices assume no skew. Real chains usually price out-of-the-money puts at a higher implied volatility than calls the same distance away, which raises the put spread's credit and shifts the break-evens; Course 3's Volatility Skew lesson shows how.
Where should the short strikes go?
There is no right answer, only a trade-off:
- Short strikes at the implied move (as here) collect a meaningful credit and are breached on roughly the reports where the stock beats its implied move.
- Short strikes wider than the implied move are breached less often, but collect less and so risk more for each dollar of credit.
- Narrower wings cut the maximum loss but also the credit. Wider wings collect more and risk more.
An iron butterfly is the extreme case: both short options at the at-the-money strike. It collects the most premium and benefits most from the crush, but it is profitable at expiration only within one credit's width of that strike, so it needs the stock to stay very close to where it was.
How do you manage an earnings iron condor?
- Decide the exit in advance. Many traders close the morning after the report, once the crush is in the price. The few days left add little reward for the risk that remains.
- Check the gap against the wings. If the stock opens beyond a short strike, each further dollar adds about $100 to the loss at expiration, up to the $370 cap at a wing. Closing then at a smaller loss is often better than hoping for a reversal.
- Watch assignment and pin risk. A short option in the money can be assigned early, and a stock near a short strike at expiration leaves your final position uncertain. Many traders close before expiration rather than leave it to chance.
- Size by the maximum loss, not the credit. Five condors here risk $1,850 to make $650.
Check your understanding
An earnings iron condor is built from a 45/50 put spread and a 60/65 call spread for a total credit of $1.50. What are its maximum profit, maximum loss and break-evens?
Show answer
Maximum profit $150 (the credit). Maximum loss $350: the $5 spread width minus the $1.50 credit, times 100. Break-evens $48.50 and $61.50: the short strikes minus and plus the credit.
Why does the earnings iron condor make less than the short straddle when the stock does not move?
Show answer
It sells strikes further from the money, which carry less premium, and it spends part of the credit buying the wings. That is the price of capping the loss.
XYZ opens at $115 after the report. Why does the condor show a $223 loss the next morning rather than the full $370?
Show answer
With six days left, the options still hold some time value, so the call spread costs less than its full $5 width to buy back. As expiration nears, the loss at that price heads toward the $370 cap.
Key takeaways
- An earnings iron condor sells a put spread and a call spread with the short strikes near the implied move.
- Maximum profit is the credit; maximum loss is the wider spread width minus the credit; break-evens are the short strikes minus and plus the credit.
- It makes less than a short straddle when the stock stays put, but its loss is capped.
- Most of the profit comes from the crush the morning after, so many traders close it then.
Common questions
Is an iron condor good for earnings?
It is one of the most common ways to sell premium into a report with a capped loss. It profits if the stock stays inside the short strikes. The trade-off is that the most it can lose is usually larger than the most it can make: nearly three times larger in this lesson's example.
Where should you put the strikes on an earnings iron condor?
Many traders place the short strikes at or just outside the implied move, read from the at-the-money straddle in the first expiration after the report. Wider short strikes collect less but are breached less often.
Should you close an earnings iron condor the next day?
Many traders do, because the crush has already delivered most of the profit and the remaining days add little reward for the gap risk that is left. Holding to expiration also brings assignment and pin risk near the short strikes.
What is the difference between an iron condor and an iron butterfly for earnings?
An iron butterfly sells both short options at the same at-the-money strike, collecting more premium but profiting fully only if the stock barely moves. An iron condor sells strikes apart, collecting less but keeping a wider profit zone.