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An Iron Butterfly is a Butterfly Spread Credit Strategy where a Short At The Money put and call are sold plus an Out Of The Money Long Put and and Long Call. An Iron Butterfly is equivalent to selling a Straddle and buying a Strangle (and is therefore considerably lower risk than a Short Straddle).

This strategy is non-directional and Volatility Bearish. The sale of the two At The Money call and put Options for more than the two protective Long Options generates a credit, in this respect, Iron Butterflies have some similarity with Iron Condors (which are two Out Of The Money put and call credit Spreads).

Iron Butterfly


See the Profit & Loss diagram of the Iron Butterfly Spread at OptionCreator
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Contributed by: Ralph Windsor

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Iron Butterfly / Options Trading Education

Video by Dan Sheridan explaining the mechanics of trading an Iron Butterfly using SPX index options.


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Iron Butterfly (Tradeking Options Playbook)
http://www.optionsplaybook.com/option-strategies/iron-butterfly/

A Tradeking Options Playbook article describing the options that an Iron Butterfly is composed of and its general characteristics.

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Short Iron Butterfly
http://www.optionseducation.org/strategies_advanced_concepts/strategies/short_iron_butterfly.html

OIC article on Iron Butterflies.

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View OIC Options Glossary in Options Market Glossary Directory

3 Joys of a SPX Weekly Iron Butterfly?
http://www.cboeoptionshub.com/2015/12/10/3-joys-of-a-spx-weekly-iron-butterfly/

Dan Sheridan explains how to implement weekly Iron Butterflies as income generating options trades in this CBOE Options Hub article.

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View CBOE in Options Market Glossary Directory

3 Joys of a SPX Weekly Iron Butterfly?
http://www.cboeoptionshub.com/2015/12/10/3-joys-of-a-spx-weekly-iron-butterfly/

Dan Sheridan explains how to implement weekly Iron Butterflies as income generating options trades in this CBOE Options Hub article.

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View CBOE in Options Market Glossary Directory


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Video

Iron Butterfly / Options Trading Education

Video by Dan Sheridan explaining the mechanics of trading an Iron Butterfly using SPX index options.