The plain-English definition
An iron condor combines a put credit spread and a call credit spread on the same underlying and expiration. It therefore has four option legs: two short options nearer the middle and two purchased options farther away. The opening premiums combine into one net credit.
The structure has a central expiration range in which all four options can expire out of the money. The purchased outer options define the loss beyond either side. Calling the middle a “safe zone” is misleading, however: the position can gain or lose value before expiration, and assignment can occur before the final payoff is known.
How the expiration payoff works
The maximum gain at expiration is the opening credit and occurs when the underlying finishes between the two short strikes. Moving beyond either short strike begins to consume that credit. At the corresponding long strike, the loss reaches its defined maximum for that side.
The maximum loss is based on the wider side of the structure minus the credit, before fees and taxes. The position has two conceptual breakevens: the lower short strike reduced by the credit and the upper short strike increased by it. Only one side can reach its maximum expiration loss, but both spreads can change value while the position is open.
Four contracts, not one object
Brokers often display an iron condor as one strategy, but each leg remains a separate contract. A short option can be assigned while its protective long option remains open. Near expiration, the underlying can also move between strikes after one exercise decision has effectively been made. That contract handling risk is separate from the clean payoff diagram.
Common misunderstanding
Defined risk does not make the structure automatically conservative. Wider wings increase the possible loss, while transaction costs apply across four legs. The credit is fixed at entry, but the relationship between that credit, the spread widths, and the expiration range determines the actual payoff.