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Options · Credit structure
Iron Butterfly
A defined-risk credit structure with its highest payoff at one central strike.
NeutralAdvanced
Strategy mechanics
What the structure is designed to do.
An Iron Butterfly sells a put and call at the same middle strike, then buys a lower-strike put and a higher-strike call for protection. The position receives a net credit at entry.
Compared with an Iron Condor, the structure usually offers more credit but a narrower profitable range. It is most sensitive when the underlying moves away from the middle strike.
Risk check
This page is educational. Suitability depends on your objectives, experience, portfolio and ability to absorb loss.
Read the OCC options disclosurePayoff profileIron Butterfly
At expirationMaximum credit is retained at the shared short strike; risk is capped beyond the wings.
The setup
- Buy a put at lower strike A
- Sell a put and call at middle strike B
- Buy a call at higher strike C
Decision map
Know the trade-offs before entry.
- When it fits
- A low-volatility outlook with the underlying expected near the middle strike.
- Break-even
- Middle strike minus and plus the net credit received.
- Maximum profit
- The net credit received, when price finishes at the middle strike.
- Maximum loss
- Strike width minus the net credit received.
- Time decay
- Generally supportive near the middle strike.
- Primary risk
- A decisive move away from the middle strike.
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