Options are versatile trading instruments that can be modified to fit current market trends. For instance, after-earnings season comes an expected decrease in volatility. Credit spreads can be an excellent way to take advantage of elevated but falling volatility and quieter markets - and the short iron condor is one of my favorites. 

A short iron condor combines a call credit and put credit spread - essentially four options - to create a range-bound profit zone bookended by two loss zones. 

Short iron condors - or just iron condors for most traders - are great when you have a neutral market outlook. So, let’s break down the strategy and how to leverage Barchart’s old AND new tools to help increase your chances of success. 

Short Iron Condor Mechanics

The short iron condor is made up of four trades. Here they are in ascending price order:

• Long put
• Short put
• Short call
• Long call

The long and short puts and calls strikes are equidistant. For example, if the long put strike is $100 and the short put strike is $105, the distance (or width of the spread) is $5, and the short call and long call strikes should also have a $5 difference. 

Short iron condors are credit spreads, so your maximum profit is received at the start of the trade. The actual value is calculated by taking the total premium received and subtracting the total premium paid. Maximum profit is achieved when the stock price stays between the short strikes at expiration. 

Maximum loss happens when the underlying reaches or crosses above the long strikes at expiration. The loss is calculated by taking the difference between the width of either spread and the net credit. 

The strategy has two breakeven prices, one at the upper end, and one at the lower end. It’s calculated by adding the net credit to the short call strike and subtracting the net credit from the short put strike. 

Screening For Short Iron Condor Trades

Now that the core mechanics are out of the way, let’s kick things off by accessing Barchart’s Short Iron Condor Screener Tool and using the following filters:

• Market Cap: More than $10 billion. Limits the results to larger and more established companies which are less volatile and are at less risk of massive price swings. 
• Current Analyst Rating: 1.5 (Moderate Sell) to 3.5 (Moderate Buy).
• Latest Earnings Date: Exclude companies with scheduled earnings releases 45 days from today. This filter ensures that I avoid companies with upcoming earnings reports within my usual 30-45-day options trading horizon. 

Here are the results arranged based on highest to lowest market cap: 

Now, let’s review the first potential trade on the list, Tesla, as a potential short iron condor trade. To do so, click on the ticker to access the stock’s profile page. Once there, go to the left-hand navigation pane, click Condor Strategies under Option Strategies, then go to the Short Iron Condor tab. 

Once there, change the expiration date from the drop-down here (1), to July 3, which is 37 days away, and then click the new Profit/Loss Chart icon here (2). 

Doing so will pull up Barchart’s new PnL chart, which gives you access to five tabs containing relevant options trading information you can use for in-depth analysis. For now, click on the Expected Move tab. 

This handy chart shows Tesla’s anticipated price range across different periods based on 85% of ATM long straddle premiums. According to this, Tesla is expected to trade between $310.83 and $414.95 on July 3. 

Based on this information, you can set either or both of your short strike prices at or near the limits of the expected range. The goal of this short iron condor setup is for TSLA to trade between these two prices at expiration. If that happens, you get to keep the net credit in full. 

For this example, let’s use the lower end of the range as basis. You can filter the results based on Leg 2, which is the short put strike, by clicking on the Show Only dropdown, then entering 310, and clicking Apply. 

Now, here are all TSLA short iron condor trades with 310-put short strikes, pre-arranged based on the lowest probability of profit. Let’s take the top one and break it down.

Trade Details

According to the screener, you can buy a $280 put and a $550 call and then sell a $310 put and a $520 call on TSLA. All trade legs expire in 37 days, on July 3. 

Breakeven prices are set at $304.34 on the put side and $525.66 on the call side. The maximum credit for the trade is $5.66 per share/$566 total, and the maximum loss is $24.34/$2,434 total. 

The trade has a reasonable 4.30 to 1 risk/reward ratio and has a 23.9% probability of loss. 

To review further trade information, you can click on the Profit/Loss Chart button at the top again (1) or the Chart icon between the current price and expiration date (2). 

The P&L tab provides an interactive profit and loss chart, along with a detailed trade breakdown, breakeven analysis, and vital statistics such as moneyness and probability of profit. 

The Greeks tab displays all major options Greeks relevant to the specific strategy you’re looking into. 

The Expected Move tab visualizes a projected price range based on the straddle and overlays past price action, earnings, and volatility metrics to guide strike selection and trade strategy. 

Meanwhile, the Volatility tab shows Implied Volatility (IV), IV Rank, and IV Percentile to help you quickly assess whether options are cheap or expensive based on historical context. It also visualizes short-term volatility trends. 

Lastly, the Trends tab analyzes stock momentum using moving averages, RSI, ATR, and Barchart’s proprietary Trend Seeker signal to identify bullish or bearish setups. Color-coded arrows and 52-week high/low markers offer a fast, visual read on trend strength and direction.

Final Thoughts

The short iron condor is an excellent income strategy for low- or falling-volatility trading environments, like the period after earnings season. With Barchart’s Stock Screener and new Profit/Loss Chart feature, you can maximize your chances of profit while ensuring that every facet of your trade fits your trading strategy and risk appetite.