By Gianluca Longinotti
Reviewed by Leav Graves
Table of Contents
The reverse iron albatross spread is a debit options strategy designed for big moves in either direction. It’s structured like a wider reverse iron condor, with strikes placed further apart. This setup benefits from strong volatility and gives traders a defined risk and a clear path to profit if the breakout is big enough.
Key Takeaways
- The reverse iron albatross spread is a four-leg options strategy that profits from strong price movement.
- It involves selling an OTM put, buying a closer OTM put, buying a closer OTM call, and selling a further OTM call.
- It requires upfront payment (debit) and is basically a wide reverse iron condor strategy.
What Is the Reverse Iron Albatross Spread?
The reverse iron albatross spread is basically a wide reverse iron condor. You sell an out-of-the-money put and call, then buy a closer OTM put and call. The strike distances are wide, which makes the payoff graph look like a V, as you can see below:

You pay a net debit to open the trade and want the price to move out beyond either breakeven. The logic is the same as the reverse iron condor, just more flexible. This extra room certainly reduces your probability of profit, but, as you will notice, it will normally give you an appealing risk/reward ratio.
Why Traders Use This Strategy
This strategy works when you expect a large move but don’t want to guess the direction. That makes it a go-to during earnings announcements, macro events, or news-driven volatility.
The table below summarizes the main features to know about this strategy:
Reason | Explanation |
Profits from breakouts | Gains when the underlying makes a big move in either direction |
Wider breakeven zones | Requires a larger move to reach profitability compared to tighter setups |
Limited risk | Max loss is the net debit paid to enter the trade |
Upfront cost | You pay a debit at entry, unlike credit-based neutral strategies |
Suited for volatility | Works best around events like earnings or economic releases |
Not beginner-friendly | Four legs to manage and rather low profit probability |
Reverse Iron Albatross Example
With the custom scan feature on our options screener, you can check the market for reverse iron albatross spread opportunities. One example: WMT at $95.88, with the following P&L chart:

As shown above, a 10-day setup could involve:
- Selling the $82 put
- Buying the $83 put
- Buying the $104 call
- Selling the $105 call
This creates a setup with a defined max loss of less than $20. Your profit is capped above $80 if WMT breaks out in either direction. With WMT about to report earnings, the timing could make sense. Check how the stock moved after past reports and factor in current expectations to see if the potential reward justifies the risk.
The Regular Iron Albatross Spread
The regular iron albatross spread is a credit-based version of this strategy, used in calm markets. It bets on prices staying between the strikes. While the structures are nearly identical, the goals are reversed. You can read the full breakdown in our dedicated article on the iron albatross spread.