Iron Butterfly
Sell Call and Put at same strike, buy protective options
Positions in Chart: Sell 25800 CE + 25800 PE, Buy 25600 PE + 26000 CE. Spot price: 25800
Setup
Sell ATM Call + Sell ATM Put + Buy OTM Call + Buy OTM Put
When to Use
- Profit from minimal price movement with defined risk
Market Outlook
Volatility Expectation↘Expected to Fall Sharply
Price DirectionSideways
Risk & Reward
Breakeven PointTwo breakeven points around center strike
Max Contract LossStrike Width - Net Credit
Max Position LossSame as Max Contract Loss
Strategy Details
Complexity LevelAdvanced
DirectionNeutral - Not much move
VolatilityFall
Number of Legs4 Leg
Strategy TypeCredit
Hedging CapabilityHeavily Hedged
Description
An iron butterfly involves selling a call and put at the same strike while buying protective options
Example
If NIFTY is at ₹25,800, you sell ₹25,800 Call and Put, buy ₹26,000 Call and ₹25,600 Put. Maximum profit occurs if NIFTY closes at ₹25,800.
This information is for educational purposes only and should not be considered as financial advice. Always consult with a qualified financial advisor before making investment decisions. Data is constructed and is not actual. Calculations may have errors.
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