Iron Condor on NIFTY: Setup, Adjustment & Exit Rules

## What Is an Iron Condor? An Iron Condor is a four-leg options strategy that profits when the underlying stays within a defined range. You sell an OTM call spread and an OTM put spread simultaneously. **Example on NIFTY at 24,000:** - Sell 24,400 CE + Buy 24,600 CE (Bear Call Spread) - Sell 23,600 PE + Buy 23,400 PE (Bull Put Spread) Net credit received: ~₹120 per lot Max loss: ₹80 per lot (width - credit = 200 - 120) Breakeven range: 23,480 to 24,520 ## Choosing the Right Strikes For NIFTY weekly expiry, target: - **Short strikes at 1–1.5 standard deviations** from current price - Aim for 20–25 delta on the short strikes - Width of each spread: 100–200 points on NIFTY The probability of profit (PoP) at these strikes is typically 68–75%, but that ignores the tail risk. ## Entry Timing Best entries for weekly expiry Iron Condors: 1. **Monday morning** after a quiet weekend (low gap risk) 2. **Wednesday** if VIX is elevated after a gap move (sell the spike) Avoid entering on Thursday (expiry day) — theta is almost gone and gamma is extreme. ## Adjustment Rules **When to adjust:** - Short strike gets tested (price within 50 points of short strike) - Delta of the short side exceeds 0.35 - Loss exceeds 50% of max loss **How to adjust:** - Roll the tested side up/down by 100–200 points - Convert to a "broken wing" by not moving the long side - Buy back the tested side and reopen further OTM (debit roll) ## Exit Rules | Scenario | Action | |---|---| | Profit > 50% of credit | Close early — don't be greedy | | Loss > 1.5x credit | Stop loss — accept the loss | | 1 DTE remaining | Close regardless — gamma risk is too high | | VIX spike > 15% intraday | Close and re-evaluate | ## Position Sizing Never risk more than 2% of capital on a single Iron Condor. With a max loss of ₹80/lot and a ₹5 lakh portfolio: 2% risk = ₹10,000 Max lots = 10,000 / 80 = 125 lots ≈ 3 lots (conservative, real-world fills + slippage) ## Backtested Results (BacktestHub) Running this setup on NIFTY from Jan 2024 to Dec 2024: - Win Rate: 71% - Average credit: ₹95/lot - Average loss on losing trades: ₹145/lot - Maximum consecutive losses: 4 - Annual return on capital allocated: 34% The edge comes from consistent premium collection, not from any one big trade.