# Earnings Iron Condor Checklist: Price the Gap Before Selling the Range Evaluate an earnings iron condor using implied move, wing width, credit, liquidity, volatility term structure, gap scenarios, assignment risk, and a written exit plan. Canonical: https://wiki.fcontext.com/options/earnings-iron-condor-checklist/ Fact checked: 2026-07-22 > For educational purposes only; not investment advice. ## Direct answer An **earnings iron condor** combines an out-of-the-money bull put credit spread with an out-of-the-money bear call credit spread, normally using one expiration after the announcement. It expresses a specific view: the post-earnings move and option repricing will leave the four-leg package worth less than the credit received. It is not simply a bet that implied volatility will fall. Earnings can move the stock beyond either short strike before the volatility benefit is realized. The trade has defined expiration loss when both wings have equal width, but gap execution, early assignment, expiration uncertainty, and closing costs can make the path more difficult than the payoff diagram suggests. ## Price the event and the payoff separately A quick market-implied move proxy for the first expiration after earnings is: `Approximate implied move = ATM call price + ATM put price`. Divide by the stock price for a percentage. This straddle price includes time beyond the announcement, bid-ask noise, skew, rates, and dividends, so it is a reference rather than a confidence interval or forecast. Compare it with several years of same-session historical earnings moves and inspect nearby expirations to see how much volatility is concentrated in the event. For an equal-width iron condor opened for net credit `c`, wing width `w`, and multiplier `M`: `Maximum profit at expiration = c × M` `Maximum loss at expiration = (w − c) × M`. The expiration breakevens are the short put strike minus the credit and the short call strike plus the credit. Before expiration, value also depends on spot, implied volatility at every strike, time, rates, dividends, and four executable quotes. “Short strikes outside the implied move” does not establish a probability or make the position safe. ## One gap can outweigh several credits A stock trades at `$100`. The first post-earnings ATM Call costs `$4.00` and the ATM Put costs `$4.50`, producing an approximate `$8.50`, or `8.5%`, implied move. A trader sells the 90/85 Put spread and the 110/115 Call spread for a combined `$1.50` credit. Each wing is `$5` wide. With a 100 multiplier, maximum expiration profit is `$150`; maximum expiration loss is `($5 − $1.50) × 100 = $350`. Breakevens are `$88.50` and `$111.50`. If the stock gaps to `$118`, the Call spread can approach its `$5` maximum value even though implied volatility falls sharply. One `$350` maximum loss requires more than two full `$150` winners to recover, before commissions and slippage. Suppose the package is quoted `$1.30/$1.70` before earnings. A `$1.50` midpoint is not necessarily executable. After the release, markets may reopen wide or one leg may have no useful bid. Evaluate the net package order first; multiplying optimistic midpoints across four legs understates execution risk. ## Pre-trade and post-event checklist - Verify the announcement date, whether it is before or after market, the expiration, and any competing event or ex-dividend date. - Record spot, the ATM straddle, implied move percentage, historical earnings gaps, volatility term structure, skew, and each leg's market. - Write all strikes, quantities, wing widths, net credit, breakevens, maximum profit, and maximum loss before sending the order. - Size from a stress-loss budget, not from a target win rate; multiple correlated earnings positions can gap together. - Use one limit order for the package where possible and define the worst acceptable fill, fees, and cancellation rule. - Stress moves through each long strike, volatility that does not collapse, spread widening, halt risk, and inability to close all legs. - Decide in advance what happens if the stock stays inside, crosses a short strike, crosses a long strike, or opens between strikes. - Reprice the full position after earnings. Closing when the event premium has largely disappeared can remove remaining Gamma and tail exposure. - Do not assume a stop order will fill near its trigger after an overnight gap. - Before expiration, manage assignment, pin risk, exercise instructions, buying power, and any unintended 100-share position per contract. ## Common misconceptions - “High IV makes selling volatility favorable.” High IV usually reflects real uncertainty and does not reveal whether it is rich enough. - “The straddle price is the market's guaranteed range.” It is a premium-based proxy, not a hard boundary or directional forecast. - “Defined risk means small risk.” The maximum may still be large relative to the credit or account. - “IV crush guarantees profit.” A large spot move and Gamma loss can dominate the Vega benefit. - “A high probability of profit proves positive expectancy.” Win size, loss size, tails, costs, and selection bias determine expectancy. - “Four liquid individual legs guarantee a liquid package.” Net execution can still be poor, especially immediately after news. ## Related topics - [Implied volatility](/options/implied-volatility/) - [Option liquidity](/options/liquidity/) - [Assignment risk](/options/assignment-risk/) - [Condor spread](/options/condor-spread/) ## Primary sources - [Options Industry Council: Short Condor (Iron Condor)](https://www.optionseducation.org/strategies/all-strategies/short-condor) - [Cboe: What Options Data May Indicate About Earnings](https://www.cboe.com/insights/posts/what-options-data-may-indicate-about-mag-7-earnings) - [Options Industry Council: Options Pricing](https://www.optionseducation.org/optionsoverview/options-pricing) - [OCC: Characteristics and Risks of Standardized Options](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document)