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Options commission

The per-contract fee charged on option trades, plus exchange and regulatory fees; a cost that scales with leg count, not with trade size in dollars.

Options pricing is per contract, so a four-leg iron-condor costs four times a single call, opened and closed. Exchange fees, the regulatory fee and index licence fees stack on top and are usually invisible until the statement.

For small premium sellers this dominates. A strategy collecting $40 per trade cannot survive $12 of round-trip friction, however good the edge is.

Example: at $0.65 per contract, a ten-lot iron condor costs 40 contracts × $0.65 = $26 to open and the same to close, or $52 round trip plus exchange fees. On $400 of collected credit that is 13% of maximum profit paid to the broker before the market has done anything.

Related: spread-width, penny-increment-program

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Payoff of an iron condor at expiryA flat profit plateau between the two sold strikes, falling away to a capped loss on each wing.Profit / loss per share0841001169095105110buy 90 putsell 105 callsell 95 putbuy 110 callMax profit 2 — the net creditMax loss 3Max loss 3Breakeven 93Breakeven 107Underlying price at expiry
Iron condor: payoff at expiry. Four strikes: the 2 credit is kept in full while the price finishes between 95 and 105, and is lost gradually outside the 93 and 107 breakevens. The bought 90 put and 110 call stop the loss at 3 on either wing.

Educational only, not advice. Spotted an error? Post in Site Feedback.