Chicken Iron Condor Strategy Explained

(chicken iron condor graph)

The chicken iron condor is an options trading strategy pioneered by TastyTrade. It’s an options trading strategy that is ideal for a high volatility environment and can be complex to set up if you’re a beginner in options. Let’s check out how the chicken iron condor strategy works and how to set it up.


  • The chicken iron condor is a directionally neutral strategy
  • The strategy aims to capture one-half of the width of the strikes
  • Sell 1 OTM Vertical Call Spread, Sell 1 OTM Vertical Put Spread
  • Max profit potential is the credit received
  • Max loss potential is the difference between the strike prices less the premium received
  • Requires a high volatility environment and ideal during earnings

What Is a Chicken Iron Condor?

chicken iron condor is a directionally neutral options trading strategy. It’s a defined risk strategy that seeks to profit from a stock trading in a narrow price range throughout the expiration of the options. 

This strategy benefits from time decay and a decrease in implied volatility. 

With a regular iron condor, we tend to look to collect around one-third the width of the strikes. So if we had a $3 wide call spread and a $3 wide put spread, we would be looking to collect $1. 

With a chicken iron condor, we aim to collect around one-half the width of the strikes. This results in a higher payout if we’re correct and a lower max loss if the move blows past our strikes. 

If our spread width is $6 wide, we will look to collect $3 in premium.

How to Create a Chicken Iron Condor?

A chicken iron condor is constructed the same way as a regular iron condor, but with tighter strikes. We will receive a net credit as a result and it will be larger than what you would get with a regular iron condor. 

The Setup

  • Sell 1 OTM Vertical Call Spread
  • Sell 1 OTM Vertical Put Spread

Ideal Implied-Volatility Environment: High

Max Profit Potential: The credit received for writing the spread. 
Max Loss Potential: The difference between the strikes prices minus the premium received. 

Breakeven Point:

  • Downside: The Short Put Strike – Credit Received
  • Upside: The Short Call Strike + Credit Received

Important Note: Since were giving ourselves narrower strikes with this strategy, the probability of profit is lower than a standard iron condor. However, we also receive more credit than a standard iron-condor.

When Should You Use a Chicken Iron Condor?

This strategy was made popular by TastyTrade. It requires a high volatility environment, and as a result, it’s best suited for trading around earnings releases.

If you are correct in the trade, you will receive a higher premium than you would with a standard iron condor, and if you are wrong, you will lose less. If the implied volatility is not that high, then it’s suggested that you adjust your strategy.

How to Manage a Chicken Iron Condor?

A way to manage this strategy and pull in more premium is to adjust the untested side, or the profitable side of the spread. This involves rolling the untested side closer to the current stock price in order to capture more premium. You should pay close attention to the behavior of the stock price to determine how you want to manage your trades.

Closing the Trade

Imagine you have a $5 dollar wide spread, you should aim to collect $2.50 if you are using a chicken condor. Since the target goal of this strategy is to collect one-half the width, you would look to close the trade out if you hit that target.

Since chicken iron condors are used during earnings announcements, they are usually closed either the same day or the day after. As mentioned before, make sure you pay attention to make sure that the implied volatility is high enough.

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