Iron Condor

An iron condor is a credit trade.  This means when you make this trade you receive an immediate credit to your account.  You can't spend that money because it is frozen in your account to secure your short options.  But you can still look at it.

There are four-legs to an iron condor and four different strike prices.  Some traders think of it like selling (shorting) two spread trades -- one bull call spread and one bear put spread -- if that is any easier to remember. 

Here's how you set one up.  First you choose the two options you want to sell to form your middle strikes -- one call and one put -- at two contiguous strike prices.  This becomes the body of your condor.  The interval of these two contiguous strikes is important, because the underlying stock must sell between these strikes for the strategy to make money.

Next, you hedge each of the short options by buying a long call on the call side, and a long put on the put side - both at outlying strike prices.  This forms your wings on either side.  Now you have it.  You have effectively set up a short bear put spread and a short bull call spread.  Taken all together, it's an iron condor.