An iron condor that is typically established by buying a lower strike out-of-the-money put option, selling even lower strike out-of-the-money put option, buying a higher strike out-of-the-money call option, and selling another even higher strike out-of-the-money call option, all on the same underlying. From the perspective of an experienced option trader, the reverse iron condor is actually made up of an out-of-the-money bull call spread and an out-of-the-money bear put spread.

The maximum profit potential from a reverse iron condor can be attained when the underlying, by expiration date, falls below the short put strike or rise above (or be at) the short call higher strike. The maximum profit is, thus, equal to the difference in strike between the two calls (or the two puts) minus the net debit amount received at the start of trade. Therefore, the upper breakeven point is equal to the long call strike plus the net debit amount, whereas the lower breakeven point is equal to the long put strike minus the net debit amount.

The breakeven range for a reverse iron condor is narrower than that for a reverse iron albatross. However, it has a wider breakeven range in comparison with a reverse iron butterfly spread.

The reverse iron condor allows investors to profit when the underlying makes a significant move in either direction.