I am trying to understand how to trade options using Iron condor strategy. I would like to know what is the difference between the credit received when your iron condor is filled vs. the profit amount you will receive when all 4 legs of the iron condor trade expire. This assumes everything go as planned.
If all legs expire worthless, then both are the same (position entry collects some premium, if all legs expire worthless, you may keep it)!
Does that mean that the profit $ amount which i could potentially earn when all 4 legs expire is given to me first at the time when i enter the trade? Difference being the money given upon trade entry is 'unrealised profit' and is only considered mine to keep after the option time period has passed and all 4 legs expire. At that point, the money will then be 'realised profit'?
Yes, the initial credit you got is your maximum gain. You can let all legs expire worthless if the underlying stays in the range, or you might consider to buy back the spreads if you realized most of the potential gains. For example: if you sell 10 points iron condor for 2.00 credit, you might consider to buy it back for 0.40 debit. If you do it, you book 80% of the maximum gain and remove the risk.
That is what I did here, just it was for $5, one can follow how the trade unfolded: https://www.elitetrader.com/et/threads/iron-condor-on-tsla.310322/
Kind of a misnomer to say "initial credit received" being that it's entirely tied up in margin on the position. It's potential credit received more like.