1302:
235:
A long iron butterfly option strategy will attain maximum profit when the price of the underlying asset at expiration is greater than the strike price set by the out-of-the-money put and less than the strike price set by the out-of-the-money call. The trader will then receive the difference between
162:
A long iron butterfly will attain maximum losses when the stock price falls at or below the lower strike price of the put or rises above or equal to the higher strike of the call purchased. The difference in strike price between the calls or puts subtracted by the premium received when entering the
133:
A short iron butterfly option strategy will attain maximum profit when the price of the underlying asset at expiration is equal to the strike price at which the call and put options are sold. The trader will then receive the net credit of entering the trade when the options all expire worthless.
113:
306:
35:. It is a limited-risk, limited-profit trading strategy that is structured for a larger probability of earning smaller limited profit when the underlying stock is perceived to have a low
44:
278:
845:
420:
327:
314:
1185:
875:
1007:
389:
262:
1245:
413:
173:
Max Loss Occurs When Price of
Underlying >= Strike Price of Long Call OR Price of Underlying <= Strike Price of Long Put
1332:
1180:
825:
367:
328:
http://www.minyanville.com/businessmarkets/articles/iron-butterfly-option-strategy-options-strategies/12/2/2010/id/31464x
1220:
758:
612:
406:
839:
1327:
1017:
1121:
932:
1240:
1235:
890:
835:
1190:
860:
850:
718:
559:
491:
236:
the options that expire in the money, while paying the premium on the options that expire out of the money.
1139:
987:
972:
937:
880:
108:{\displaystyle {\mbox{ironfly}}=\Delta ({\mbox{butterfly strike price}})\times (1+rt)-{\mbox{butterfly}}}
1200:
1051:
967:
544:
865:
226:
Max. Return = Net Credit ÷ Margin = $ 3.00 ÷ $ 2.00 = 150% (If XYZ is trading at $ 145 on expiration).
1154:
1111:
1101:
1091:
812:
753:
688:
642:
637:
511:
471:
438:
36:
870:
1159:
947:
693:
339:
118:
1210:
1195:
1164:
1149:
1116:
982:
773:
738:
501:
466:
429:
272:
28:
1215:
1205:
1144:
1131:
1106:
992:
778:
574:
385:
258:
1096:
1086:
1076:
1035:
1030:
1012:
942:
708:
703:
675:
627:
506:
446:
1306:
1276:
1271:
1225:
1061:
1056:
1002:
912:
820:
793:
733:
728:
698:
647:
632:
549:
529:
1281:
1266:
1066:
977:
927:
904:
885:
713:
655:
622:
617:
597:
521:
1321:
1261:
1230:
1071:
997:
957:
952:
788:
660:
607:
602:
584:
481:
461:
292:
1081:
855:
783:
763:
723:
592:
564:
554:
496:
353:
32:
217:
Max. Risk = Margin = Difference in
Strikes − Net Credit = $ 5.00 − $ 3.00 = $ 2.00
154:
where X = the spot price (i.e. current market price of underlying) and a > 0.
962:
830:
801:
797:
748:
539:
534:
122:
117:
It is known as an iron butterfly because it replicates the characteristics of a
1286:
922:
917:
683:
569:
220:
Upper Break Even = Short Call Strike + Net Credit = $ 145 + $ 3.00 = $ 148.00
476:
223:
Lower Break Even = Short Put Strike − Net Credit = $ 145 − $ 3.00 = $ 142.00
170:
Max Loss = Strike Price of Long Call − Strike Price of Short Call − Premium
31:
that involves buying and holding four different options at three different
1301:
137:
A short iron butterfly option strategy consists of the following options:
1046:
768:
665:
486:
255:
Option volatility and pricing: advanced trading strategies and techniques
189:
Upper
Breakeven Point = Strike Price of Short Call + Net Premium Received
192:
Lower
Breakeven Point = Strike Price of Short Put − Net Premium Received
27:
also known as the ironfly, is the name of an advanced, neutral-outlook,
185:
Using the following formulas, the break even points can be calculated:
20:
398:
214:
Max. Profit = Net Credit = $ 4.00 + $ 4.00 − $ 2.00 − $ 3.00 = $ 3.00
182:
Two break even points are produced with the iron butterfly strategy.
402:
368:"The Reverse Iron Butterfly Spread - Trading a Volatile Market"
293:"Iron Butterfly Explained | Online Option Trading Guide"
141:
Long one out-of-the-money put: strike price of X − a
384:(4th ed.). New York: New York Institute of Finance.
166:
The formula for calculating maximum loss is given below:
340:"Iron Butterfly Options Strategy - the Options Playbook"
99:
65:
49:
150:
Long one out-of-the-money call: strike price of X + a
47:
354:"Iron Butterfly Spread | Iron Butterfly Option"
1254:
1173:
1130:
1026:
903:
811:
674:
583:
520:
454:
445:
107:
121:with a different combination of options (compare
16:Type of advanced stock options trading strategy
147:Short one at-the-money call: strike price of X
414:
144:Short one at-the-money put: strike price of X
8:
231:Long iron butterfly (reverse iron butterfly)
451:
421:
407:
399:
277:: CS1 maint: location missing publisher (
253:Natenberg, Sheldon (2015). "Chapter 14".
98:
64:
48:
46:
1246:Power reverse dual-currency note (PRDC)
1186:Constant proportion portfolio insurance
245:
270:
7:
1181:Collateralized debt obligation (CDO)
163:trade is the maximum loss accepted.
58:
14:
382:Options as a Strategic Investment
1300:
1008:Year-on-year inflation-indexed
380:McMillan, Lawrence G. (2002).
92:
77:
71:
61:
1:
1018:Zero-coupon inflation-indexed
257:(Second ed.). New York.
307:"Long Iron Butterfly Spread"
208:Sell XYZ 145 Call for $ 4.00
1221:Foreign exchange derivative
613:Callable bull/bear contract
211:Buy XYZ 150 Call for $ 3.00
205:Sell XYZ 145 Put for $ 4.00
1349:
202:Buy XYZ 140 Put for $ 2.00
1295:
1122:Stock market index future
436:
1241:Mortgage-backed security
1236:Interest rate derivative
1211:Equity-linked note (ELN)
1196:Credit-linked note (CLN)
29:options trading strategy
1191:Contract for difference
492:Risk-free interest rate
973:Forward Rate Agreement
109:
67:butterfly strike price
1333:Derivatives (finance)
1201:Credit default option
545:Employee stock option
110:
1155:Inflation derivative
1140:Commodity derivative
1112:Single-stock futures
1102:Normal backwardation
1092:Interest rate future
933:Conditional variance
439:Derivative (finance)
129:Short iron butterfly
45:
1307:Business portal
1160:Property derivative
197:Example of strategy
1165:Weather derivative
1150:Freight derivative
1132:Exotic derivatives
1052:Commodities future
739:Intermarket spread
502:Synthetic position
430:Derivatives market
105:
103:
69:
53:
1328:Options (finance)
1315:
1314:
1216:Equity derivative
1206:Credit derivative
1174:Other derivatives
1145:Energy derivative
1107:Perpetual futures
988:Overnight indexed
938:Constant maturity
899:
898:
846:Finite difference
779:Protective option
178:Break even points
102:
68:
52:
1340:
1305:
1304:
1077:Forwards pricing
851:Garman–Kohlhagen
452:
423:
416:
409:
400:
395:
372:
371:
364:
358:
357:
350:
344:
343:
336:
330:
325:
319:
318:
313:. Archived from
311:www.fidelity.com
303:
297:
296:
289:
283:
282:
276:
268:
250:
114:
112:
111:
106:
104:
100:
70:
66:
54:
50:
1348:
1347:
1343:
1342:
1341:
1339:
1338:
1337:
1318:
1317:
1316:
1311:
1299:
1291:
1277:Great Recession
1272:Government debt
1250:
1226:Fund derivative
1169:
1126:
1087:Futures pricing
1062:Dividend future
1057:Currency future
1040:
1022:
895:
871:Put–call parity
807:
794:Vertical spread
729:Diagonal spread
699:Calendar spread
670:
579:
516:
441:
432:
427:
392:
379:
376:
375:
366:
365:
361:
352:
351:
347:
338:
337:
333:
326:
322:
305:
304:
300:
291:
290:
286:
269:
265:
252:
251:
247:
242:
233:
199:
180:
160:
131:
43:
42:
25:iron butterfly,
17:
12:
11:
5:
1346:
1344:
1336:
1335:
1330:
1320:
1319:
1313:
1312:
1310:
1309:
1296:
1293:
1292:
1290:
1289:
1284:
1282:Municipal debt
1279:
1274:
1269:
1267:Corporate debt
1264:
1258:
1256:
1252:
1251:
1249:
1248:
1243:
1238:
1233:
1228:
1223:
1218:
1213:
1208:
1203:
1198:
1193:
1188:
1183:
1177:
1175:
1171:
1170:
1168:
1167:
1162:
1157:
1152:
1147:
1142:
1136:
1134:
1128:
1127:
1125:
1124:
1119:
1114:
1109:
1104:
1099:
1094:
1089:
1084:
1079:
1074:
1069:
1067:Forward market
1064:
1059:
1054:
1049:
1043:
1041:
1039:
1038:
1033:
1027:
1024:
1023:
1021:
1020:
1015:
1010:
1005:
1000:
995:
990:
985:
980:
975:
970:
965:
960:
955:
950:
948:Credit default
945:
940:
935:
930:
925:
920:
915:
909:
907:
901:
900:
897:
896:
894:
893:
888:
883:
878:
873:
868:
863:
858:
853:
848:
843:
833:
828:
823:
817:
815:
809:
808:
806:
805:
791:
786:
781:
776:
771:
766:
761:
756:
751:
746:
744:Iron butterfly
741:
736:
731:
726:
721:
716:
714:Covered option
711:
706:
701:
696:
691:
686:
680:
678:
672:
671:
669:
668:
663:
658:
653:
652:Mountain range
650:
645:
640:
635:
630:
625:
620:
615:
610:
605:
600:
595:
589:
587:
581:
580:
578:
577:
572:
567:
562:
557:
552:
547:
542:
537:
532:
526:
524:
518:
517:
515:
514:
509:
504:
499:
494:
489:
484:
479:
474:
469:
464:
458:
456:
449:
443:
442:
437:
434:
433:
428:
426:
425:
418:
411:
403:
397:
396:
390:
374:
373:
359:
345:
331:
320:
317:on 2015-09-23.
298:
284:
263:
244:
243:
241:
238:
232:
229:
228:
227:
224:
221:
218:
215:
212:
209:
206:
203:
198:
195:
194:
193:
190:
179:
176:
175:
174:
171:
159:
156:
152:
151:
148:
145:
142:
130:
127:
97:
94:
91:
88:
85:
82:
79:
76:
73:
63:
60:
57:
15:
13:
10:
9:
6:
4:
3:
2:
1345:
1334:
1331:
1329:
1326:
1325:
1323:
1308:
1303:
1298:
1297:
1294:
1288:
1285:
1283:
1280:
1278:
1275:
1273:
1270:
1268:
1265:
1263:
1262:Consumer debt
1260:
1259:
1257:
1255:Market issues
1253:
1247:
1244:
1242:
1239:
1237:
1234:
1232:
1231:Fund of funds
1229:
1227:
1224:
1222:
1219:
1217:
1214:
1212:
1209:
1207:
1204:
1202:
1199:
1197:
1194:
1192:
1189:
1187:
1184:
1182:
1179:
1178:
1176:
1172:
1166:
1163:
1161:
1158:
1156:
1153:
1151:
1148:
1146:
1143:
1141:
1138:
1137:
1135:
1133:
1129:
1123:
1120:
1118:
1115:
1113:
1110:
1108:
1105:
1103:
1100:
1098:
1095:
1093:
1090:
1088:
1085:
1083:
1080:
1078:
1075:
1073:
1072:Forward price
1070:
1068:
1065:
1063:
1060:
1058:
1055:
1053:
1050:
1048:
1045:
1044:
1042:
1037:
1034:
1032:
1029:
1028:
1025:
1019:
1016:
1014:
1011:
1009:
1006:
1004:
1001:
999:
996:
994:
991:
989:
986:
984:
983:Interest rate
981:
979:
976:
974:
971:
969:
966:
964:
961:
959:
956:
954:
951:
949:
946:
944:
941:
939:
936:
934:
931:
929:
926:
924:
921:
919:
916:
914:
911:
910:
908:
906:
902:
892:
889:
887:
884:
882:
879:
877:
876:MC Simulation
874:
872:
869:
867:
864:
862:
859:
857:
854:
852:
849:
847:
844:
841:
837:
836:Black–Scholes
834:
832:
829:
827:
824:
822:
819:
818:
816:
814:
810:
803:
799:
795:
792:
790:
789:Risk reversal
787:
785:
782:
780:
777:
775:
772:
770:
767:
765:
762:
760:
757:
755:
752:
750:
747:
745:
742:
740:
737:
735:
732:
730:
727:
725:
722:
720:
719:Credit spread
717:
715:
712:
710:
707:
705:
702:
700:
697:
695:
692:
690:
687:
685:
682:
681:
679:
677:
673:
667:
664:
662:
659:
657:
654:
651:
649:
646:
644:
643:Interest rate
641:
639:
638:Forward start
636:
634:
631:
629:
626:
624:
621:
619:
616:
614:
611:
609:
606:
604:
601:
599:
596:
594:
591:
590:
588:
586:
582:
576:
573:
571:
568:
566:
565:Option styles
563:
561:
558:
556:
553:
551:
548:
546:
543:
541:
538:
536:
533:
531:
528:
527:
525:
523:
519:
513:
510:
508:
505:
503:
500:
498:
495:
493:
490:
488:
485:
483:
482:Open interest
480:
478:
475:
473:
470:
468:
465:
463:
462:Delta neutral
460:
459:
457:
453:
450:
448:
444:
440:
435:
431:
424:
419:
417:
412:
410:
405:
404:
401:
393:
391:0-7352-0197-8
387:
383:
378:
377:
369:
363:
360:
355:
349:
346:
341:
335:
332:
329:
324:
321:
316:
312:
308:
302:
299:
294:
288:
285:
280:
274:
266:
264:9780071818780
260:
256:
249:
246:
239:
237:
230:
225:
222:
219:
216:
213:
210:
207:
204:
201:
200:
196:
191:
188:
187:
186:
183:
177:
172:
169:
168:
167:
164:
157:
155:
149:
146:
143:
140:
139:
138:
135:
128:
126:
124:
120:
115:
95:
89:
86:
83:
80:
74:
55:
40:
38:
34:
33:strike prices
30:
26:
22:
1082:Forward rate
993:Total return
881:Real options
784:Ratio spread
764:Naked option
743:
724:Debit spread
555:Fixed income
497:Strike price
381:
362:
348:
334:
323:
315:the original
310:
301:
287:
254:
248:
234:
184:
181:
165:
161:
158:Limited risk
153:
136:
132:
116:
41:
24:
18:
1013:Zero Coupon
943:Correlation
891:Vanna–Volga
749:Iron condor
535:Bond option
123:iron condor
1322:Categories
1287:Tax policy
1003:Volatility
913:Amortising
754:Jelly roll
689:Box spread
684:Backspread
676:Strategies
512:Volatility
507:the Greeks
472:Expiration
240:References
37:volatility
978:Inflation
928:Commodity
886:Trinomial
821:Bachelier
813:Valuation
694:Butterfly
628:Commodore
477:Moneyness
273:cite book
119:butterfly
101:butterfly
96:−
75:×
59:Δ
1117:Slippage
1047:Contango
1031:Forwards
998:Variance
958:Dividend
953:Currency
866:Margrabe
861:Lattices
840:equation
826:Binomial
774:Strangle
769:Straddle
666:Swaption
648:Lookback
633:Compound
575:Warrants
550:European
530:American
522:Vanillas
487:Pin risk
467:Exercise
1036:Futures
656:Rainbow
623:Cliquet
618:Chooser
598:Barrier
585:Exotics
447:Options
51:ironfly
21:finance
1097:Margin
963:Equity
856:Heston
759:Ladder
709:Condor
704:Collar
661:Spread
608:Binary
603:Basket
388:
261:
968:Forex
923:Basis
918:Asset
905:Swaps
831:Black
734:Fence
593:Asian
455:Terms
802:Bull
798:Bear
540:Call
386:ISBN
279:link
259:ISBN
570:Put
125:).
23:an
19:In
1324::
800:,
560:FX
309:.
275:}}
271:{{
39:.
842:)
838:(
804:)
796:(
422:e
415:t
408:v
394:.
370:.
356:.
342:.
295:.
281:)
267:.
93:)
90:t
87:r
84:+
81:1
78:(
72:)
62:(
56:=
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.