Iron Butterfly Calculator
An Iron Butterfly is an aggressive neutral strategy that targets a precise stock pin. By combining sold at-the-money (ATM) call and put options with out-of-the-money protection, it commands high credit collection.
The setup involves selling an ATM call and an ATM put (creating an ATM Straddle), and purchasing OTM wings for safety. This strategy captures large credits and has narrow profit regions but very small risk relative to the credit captured.
Simulates P&L if the underlying closes at any price at expiry.
Frequently Asked Questions
What is the main benefit of an Iron Butterfly?
It offers a very high risk-to-reward ratio. Your potential maximum profit is usually much larger than your potential maximum loss compared to standard iron condors.
How narrow is the profit zone?
The profit zone is a peak centered exactly at the sold ATM strike price. Even a small price move away from the center reduces the profit, but losses are strictly capped by the protective outer legs.