What Is the Margin on an Iron Condor Option Strategy?

Overview:

If an iron condor strategy exists in the account, the margin requirement will be the short put strike - the long put strike.

Background:

Example:

  • 10 SPY Dec19 160P

  • 10 SPY Dec19 170P

  • 10 SPY Dec19 180C

  • 10 SPY Dec19 190C

The margin requirement is determined by taking the strike of the short put (170) and subtracting the strike of the long put (160)

170-160 = 10

Take the difference and multiply by the number of contracts (10) and the multiplier (100)

10*10*100 = 10,000

In order for an iron condor to be recognized under exchange rules, the options must all be on the same underlying instrument and have the same expiration date, have different strike prices and the strike distance between the puts and the calls must be equal. If the distance between the puts and calls is different the position will be margined as two separate spreads with two separate margin requirements.

We utilize option margin optimization software to try to create the minimum margin requirement. However, due to the system requirements required to determine the optimal solution, we cannot always guarantee the optimal combination in all cases. It is possible that given the option positions in the account, the iron condor you are trying to create will not be recognized as such.