# Reverse Iron Condor: Four Legs, Break-Evens, and Expiration Risk

Understand the reverse iron condor as a long put spread plus a long call spread, with exact expiration payoffs, break-evens, volatility exposure, and assignment risks.

Canonical: https://wiki.fcontext.com/options/reverse-iron-condor/
Fact checked: 2026-07-22

> For educational purposes only; not investment advice.

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## Direct answer

A **reverse iron condor** is a four-leg, net-debit position designed to benefit from a sufficiently large move in either direction by expiration. It combines a long bear put spread below the underlying price with a long bull call spread above it, all with the same expiration. The initial debit is the maximum theoretical expiration loss, while the narrower wing width caps the maximum theoretical gain.

Naming is not universal. The Options Industry Council calls this payoff a **long iron condor** or long condor; “reverse iron condor” distinguishes it from the more familiar short, credit iron condor. Always identify the four legs instead of relying on the strategy name.

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## Construction and expiration payoff

For strikes `K₁ < K₂ < K₃ < K₄`, the position is:

- short one `K₁` Put and long one `K₂` Put;
- long one `K₃` Call and short one `K₄` Call;
- same underlying, expiration, and contract quantity for every leg.

It is a long `K₂/K₁` Put debit spread plus a long `K₃/K₄` Call debit spread. With net debit `D`, put-wing width `Wₚ = K₂ − K₁`, and call-wing width `W꜀ = K₄ − K₃`:

`maximum expiration loss = D`

`maximum expiration gain = min(Wₚ, W꜀) − D`

For equal-width wings, the lower break-even is `K₂ − D` and the upper break-even is `K₃ + D`. These formulas assume all four legs remain open through expiration, one-for-one quantities, and transaction costs excluded. Unequal widths require evaluating each tail separately.

Before expiration, the market value also depends on time, implied volatility, skew, and each leg's bid-ask spread. Near the central loss zone, the position is commonly negative Theta and positive Vega, but its Greeks change with spot and time and are not permanent labels.

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## A `$5`-wide example

Assume the stock is near `$100` and one same-expiration position is opened:

| Leg | Premium per share | Cash flow |
| --- | ---: | ---: |
| Buy `95` Put | `$2.60` | `−$2.60` |
| Sell `90` Put | `$1.10` | `+$1.10` |
| Buy `105` Call | `$2.40` | `−$2.40` |
| Sell `110` Call | `$1.00` | `+$1.00` |

The net debit is `$2.90` per share. Both wings are `$5` wide, so:

- lower break-even: `$95 − $2.90 = $92.10`;
- upper break-even: `$105 + $2.90 = $107.90`;
- maximum expiration loss: `$2.90` per share when the stock is between `$95` and `$105`;
- maximum expiration gain: `$5.00 − $2.90 = $2.10` per share at or below `$90`, or at or above `$110`.

For a standard `100`-share multiplier, those amounts are `$290` maximum theoretical loss and `$210` maximum theoretical gain per one-lot position, before fees. At expiration with the stock at `$93`, the Put spread is worth `$2`, the Call spread is worth zero, and the result is `$2.00 − $2.90 = −$0.90` per share, or `−$90`.

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## Risks and execution checklist

- Confirm option style, deliverable, multiplier, settlement, expiration, and corporate-action adjustments.
- Enter all legs as one limit-priced complex order when feasible; four separate fills can change the debit materially.
- Compare the required move with the implied move, event timing, and time remaining rather than treating “large move” as a forecast.
- Include four-leg bid-ask friction, commissions, and exit costs in both break-evens.
- Do not assume an implied-volatility increase guarantees profit; spot, skew, time decay, and quote width move simultaneously.
- Treat the displayed maximum loss as an expiration payoff result, not a guarantee against operational loss.
- American-style short legs can be assigned early; the long protective leg does not exercise automatically just because a short leg is assigned.
- Near expiration, different legs can be exercised, assigned, or abandoned differently and create an unintended stock position.
- A broker may close selected legs when the account cannot support exercise or assignment.
- Rolling is closing one position and opening another, with a new debit and new risk limits.

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## Common misconceptions

- “Reverse iron condor always means the same legs.” Some platforms use long iron condor or long condor; verify the order ticket.
- “Any move earns money.” The stock must move beyond a break-even by expiration, net of costs.
- “Maximum gain occurs immediately after crossing a break-even.” Break-even means zero expiration profit; full wing value requires reaching the outer strike.
- “Both tails can pay at once.” At expiration only the Put wing or Call wing can have intrinsic value.
- “Higher IV automatically produces the maximum gain.” Maximum expiration payoff is determined by stock price and strikes, not IV.
- “Defined risk means no assignment risk.” A short American-style option can be assigned before the long leg is exercised.
- “Four legs make execution cheap.” Each leg adds spread, fee, liquidity, and partial-fill exposure.
- “It is simply a cheaper strangle.” The short outer options reduce debit but also cap both tails.

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## Related topics

- [Iron condor](/options/iron-condor/)
- [Long straddle](/options/long-straddle/)
- [Long strangle](/options/long-strangle/)
- [Pin risk](/options/pin-risk/)

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## Sources

- [Options Industry Council: Long Condor](https://www.optionseducation.org/strategies/all-strategies/long-iron-condor)
- [Cboe: 0DTE Trading Resources](https://www.cboe.com/tradable-products/0dte/)
- [OCC: Characteristics and Risks of Standardized Options](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document)
- [FINRA: Trading Options—Understanding Assignment](https://www.finra.org/investors/insights/trading-options-understanding-assignment)