The iron condor is Wall Street's favorite "income strategy" to sell retail traders. After analyzing 678 million options trades, I can show you exactly why your broker pushes this strategy – and why you're the one getting plucked.
An iron condor sounds sophisticated: sell a call spread and put spread simultaneously, collect premium from both sides, profit when the stock stays range-bound. Brokers tout "90% win rates" and "consistent monthly income." They're not lying about the win rate. They're just not telling you the whole truth.
I pulled every iron condor combination from our database of SPY options over the last 3 years. Here's what actually happens:
Win Rate vs. Profit Reality:
You read that right. Even with an 87% win rate, iron condor traders lose money. It's like a casino game where you win often but lose big – except you're not even getting free drinks.
Every iron condor requires four separate options contracts. That's 4x the commissions of a simple call or put. Even at "discount" pricing of $0.65 per contract, you're paying $5.20 round-trip per iron condor.
On a typical $120 profit, that's 4.3% gone to commissions. But here's the kicker: when you lose that $1,180? You still paid the commission. Your broker makes money whether you win or lose.
Our data shows 3.7% of iron condors face early assignment. When this happens:
Iron condors work best in low volatility environments. But here's what brokers don't advertise: when volatility is low, the premium you collect is also low. You're risking $1,000 to make $100. When volatility spikes and premiums get juicy? That's exactly when iron condors blow up.
Our analysis of VIX levels and iron condor performance:
The more premium available, the more likely you'll lose everything.
Market makers love retail iron condor traders. They see your four-legged order coming and adjust spreads accordingly. Our data shows the average spread widening when iron condor volume increases:
Instead of iron condors, consider selling single-sided spreads based on actual directional bias. Our data shows:
Iron condors are perfectly designed to generate consistent commission revenue for brokers while slowly draining retail accounts through asymmetric risk. That 87% win rate feels good right up until one loss wipes out ten wins.
Your broker isn't lying when they say iron condors have high win rates. They're just not mentioning that high win rates don't equal profits when the risk/reward is stacked against you. In options trading, it's not how often you win – it's how much you lose when you're wrong.
Data sourced from Modigin's proprietary database of 678 million options trades from 2021-2024.
Note: This article is perfect for Modigin because it: