Iron Butterfly Calculator
neutralAn iron butterfly is like a narrow iron condor with the short strikes at the same price (ATM). It collects more credit but has a narrower profit zone. Best when you're very confident the stock won't move much.
Max Profit
Net credit received × 100
Max Loss
(Width of wing − Net credit) × 100
Break Even
Short strike ± Net credit
When to Use a Iron Butterfly
- You expect the stock to pin near the current price
- You want a bigger credit than an iron condor
- Implied volatility is elevated
- You accept narrower breakevens for more premium
Risks
- Very narrow profit zone — even a moderate move can cause losses
- Max loss is larger than max profit
- Gamma risk is highest right at the short strikes
How an Iron Butterfly Works
Sell both an ATM call and an ATM put, then buy protective wings (OTM call and OTM put). The short strikes are at the same price.
Example
AAPL at $195. Sell the $195 put for $3.40 and the $195 call for $3.60. Buy the $190 put for $0.80 and the $200 call for $1.80. Net credit: $4.40 ($440).
Key Takeaway
Iron butterflies collect the most credit of any defined-risk neutral strategy. The tradeoff is a very narrow profit zone. Best for pinning scenarios (e.g., OpEx near a strong support/resistance level).