Looking for a flexible way to trade neutral markets without relying on tight price ranges? The iron albatross spread might be what you need. It’s similar to the iron condor but gives your trade more breathing room. In today’s article, we break down how this strategy works and why it matters.
KEY TAKEAWAYS
The iron albatross spread is a neutral options strategy that works like a very wide iron condor, offering a broader profit range.
It involves four option legs - two calls and two puts - with strikes set further out than in a classic condor.
Some describe it as a mix between a butterfly and a condor, but it’s best seen as a wide iron condor.
What Is the Iron Albatross Spread?
The iron albatross spread uses four legs and works best when you expect the market to stay in a wide range. You sell one OTM call and one OTM put, then buy a further OTM call and a further OTM put. This creates a credit spread and generates income upfront.
This is the typical iron albatross P&L chart:
It’s a neutral strategy, meaning it benefits most when the underlying doesn’t move much. The strikes are spaced further apart than in a typical iron condor, which increases the chance of profit but lowers the maximum payout.
Why Traders Use This Strategy
Traders use this options strategy when they expect the market to stay flat but want more room for error than a typical iron condor allows. The wider strike distance gives a higher chance of profit, but the max return is smaller. It’s not ideal for beginners, since the strategy has four option legs and a beginner may want to start trading with something easier (although the capped loss risk is a nice thing to have for someone who’s not experienced in options trading).
The table below summarizes the main features to know about this options strategy:
Reason
Explanation
Wider profit range
Strikes are further apart than in a standard condor
Higher probability of success
More room for the underlying to stay within breakeven levels
Lower max profit
Premium is smaller due to reduced risk
Upfront credit
Like an iron condor, it brings in a credit at entry
One example: SNOW at $181.02, with the following P&L chart:
As you can see above, a 10-day setup could involve selling the $160 put and $197.5 call, buying the $146 put and $210 call, with over $400 max profit potential.
While the iron albatross focuses on stability, some traders prefer strategies that thrive on volatility. If you’re expecting a big move but aren’t sure of the direction, a strap options strategy could offer a better fit, especially when you want asymmetric exposure to upside or downside risk.
The Reverse Iron Albatross Spread
One last thing: there's also a mirrored version called the reverse iron albatross spread. It’s a debit strategy used in volatile markets, built with the same four legs but flipped. You pay upfront and hope for a big move. We cover it in detail in our full breakdown of the reverse iron albatross spread, including how to set it up and when it works best.
Gianluca Longinotti is an experienced trader, advisor, and financial analyst with over a decade of professional experience in the banking sector, trading, and investment services.
Leav Graves is the founder and CEO of Option Samurai and a licensed investment professional with over 19 years of trading experience, including working professionally through the 2008 financial crisis.
Gianluca LonginottiFinance Writer - Traders Education
Leav GravesCEO