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Next: see how a run of losses plays out
The risk of ruin calculator shows the chance that a run of full losses reaches your loss floor.
What is included
- What it is, in plain words
- The formula or mechanism, with exact arithmetic
- How it hits grid, martingale and DCA bots
- A check you can run before you switch a bot on
Who it is for
- People who run or plan to run a trading bot
- Anyone reading a backtest or a bot sales page
- Readers who want the numbers, not the pitch
- Not advice, and not a signal service
Key facts
- An iron condor sells an out of the money put spread and an out of the money call spread at the same time, and collects a credit. It profits if the price ends between the two sold strikes.
- In the made-up example below the maximum profit is $150 and the maximum loss is $350 per contract, so the loss is 2.3 times the profit (calculated by us on 28 Oct 2026, exact).
- The breakevens are 93.50 and 106.50: the sold strikes pushed out by the credit.
- To break even the trade must win 70.0% of the time, before fees. A high win rate is built into the shape, and one large loss can erase many small wins.
- A bot that sells condors on a schedule is selling the chance of a big move. Test it through a quiet year and a wild one.
The four legs
Sell a put below the price and buy a cheaper put further below it: a put spread. Sell a call above the price and buy a cheaper call further above it: a call spread. Together they are an iron condor. The bought legs cap the loss, and the sold legs bring in the credit. In the made-up example the price is 100, and the legs are:
| Leg | Strike | Action | Role |
|---|---|---|---|
| Put | 90 | Buy | Caps the loss below |
| Put | 95 | Sell | Lower edge of the profit zone |
| Call | 105 | Sell | Upper edge of the profit zone |
| Call | 110 | Buy | Caps the loss above |
The trade collects 1.50 a unit, which is $150 per contract of 100 units. That is the most it can make, and it keeps all of it if the price ends anywhere from 95 to 105.
Maximum loss = (spread width - credit) x 100
Lower breakeven = sold put strike - credit
Upper breakeven = sold call strike + credit
Win rate needed = maximum loss / (maximum profit + maximum loss)
The payoff, with numbers
The spread width is 5 on each side. The most the trade can lose is the width minus the credit, 3.50 a unit, or $350. It can only lose that much on one side at a time, since the price cannot finish below 90 and above 110 together. Here is the result at expiry for a few prices:
| Price at expiry | Result per contract |
|---|---|
| 85 | -$350 |
| 90 | -$350 |
| 93.5 | $0 |
| 95 | $150 |
| 100 | $150 |
| 105 | $150 |
| 106.5 | $0 |
| 110 | -$350 |
| 115 | -$350 |
Why a bot needs the win rate
Each win makes $150 and each loss costs $350. At a win rate of 60% the average trade is -$50, at 70% it is $0, at 80% it is $50 and at 90% it is $100. The break even is 70.0%. Fees come off every trade and every leg, so the real figure is higher. That is the same lopsided shape as a martingale: many small wins and a rare large loss, which looks smooth until the large one arrives.
Reading the payoff picture
The line is flat on top between 95 and 105, slopes down on each side, and goes flat again at the bottom beyond 90 and 110. The two slopes are where the sold options are in the money and the bought ones are not yet. The flat floor is the protection the bought legs buy. Moving the bought strikes further out lowers the credit and raises the cap on the loss, and moving the sold strikes closer to the price raises the credit and shortens the profit zone. Each choice trades a larger credit for a lower chance of keeping it, and none of them changes the fact that the price must stay inside the breakevens.
What goes wrong
- A big move. A gap through a bought strike takes the full loss, and one such loss can wipe out many credits. Check the worst week in your data, not the average one.
- Costs on four legs. Each leg pays a commission and a bid ask gap on the way in and the way out. See spread and slippage.
- Early assignment and margin. The sold legs can be assigned early, and the broker holds margin against the maximum loss. A bot must handle both.
- A flattering test. A backtest over a calm period shows a smooth line. See survivorship bias and backtesting.
- Tuning the strikes. Choosing the strikes and the days to expiry to fit the past is overfitting.
How to check a condor bot
Work out the win rate needed from the real credit and width. Count how often the price in your data finished beyond the breakevens, in the worst year as well as the best, and compare. Include full costs, keep data back for one final test and look at the max drawdown. Size so that a few full losses in a row do not end the account, using the risk of ruin calculator.
What this page does not tell you
It does not say that selling condors makes money, or what to trade. The prices and the credit are made up, options carry real risk, and this is education, not advice.
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FAQ
Frequently Asked Questions
What is an iron condor?
An options strategy that sells an out of the money put spread and call spread together for a credit. It profits if the price stays between the sold strikes until expiry.
What is the maximum profit of an iron condor?
The credit received. In the example it is $150 per contract, kept if the price ends between the two sold strikes.
What is the maximum loss of an iron condor?
The spread width minus the credit, times the contract size. In the example it is $350 per contract, on whichever side the price breaks.
What win rate does an iron condor need?
The maximum loss divided by the sum of the maximum profit and maximum loss. In the example it is 70.0%, before fees.
Can a bot trade iron condors?
It can, but it sells the chance of a large move, pays costs on four legs and needs margin. Test it through a calm year and a wild one with full costs.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It is general education about a payoff. The prices are made up, options carry real risk and it does not consider your situation.
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