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Iron Condors
Analyzing the risk profile of iron condors
What Happens at Expiration?
If the Share Price Lands Between Both Short Strikes
If the share price lands between both short strikes as shown above, all options will be and expire worthless. Your position will be a maximum winner and the position will disappear from your account by the next trading day.
If the Share Price Lands Between the Puts
If the share price lands between your puts at expiration, your short put will be and the rest of your options will be OTM. If you do not take action and close the short put before the end of the day, you will be 100 long shares at the strike price. If the short put has less intrinsic value than your total credit collected, you can buy it back and keep the difference as profit. If the put has attained an intrinsic value greater than your credit, you will have to buy it back at a loss in order to close the position. The long put and both calls will expire completely worthless.
If the Puts Expire ITM
If both puts expire ITM, the two will cancel each other out and you will have to pay the full width of the spread. If the credit you collected is not greater than that width, you will take on a loss. In the example below, the spread is $3 wide, and the total credit was only $1.30. The result is a $1.70 loss. The calls, on the other hand, are OTM and completely worthless. They will be cleared from your account.
If the Share Price Lands Between the Calls
If the share price lands between your calls at expiration, your short call will be and the rest of your options will be OTM. If you do not take action and close the short call before the end of the day, you will be 100 short shares at the strike price. If the short call has less intrinsic value than your total credit collected, you can buy it back and keep the difference as profit. If the call has attained an intrinsic value greater than your credit, you will have to buy it back at a loss in order to close the position. The long call and both puts will expire completely worthless.
If the Calls Expire ITM
If both calls expire ITM, the two will cancel each other out and you will have to pay the full width of the spread. If the credit you collected is not greater than that width, you will take on a loss. In the example below, the spread is $3 wide, and the total credit was only $1.30. The result is a $1.70 loss. The puts, on the other hand, are OTM and completely worthless. They will be cleared from your account.
