page_title: Iron butterfly (options strategy)
section_title: Short iron butterfly
hierarchical_section_title: Iron butterfly (options strategy) / Short iron butterfly
caption_attribution_description: English: Payoff Graph of Iron Butterfly Option Strategy Broken Down
context_page_description: In finance an iron butterfly, also known as the ironfly, is the name of an advanced, neutral-outlook, options trading strategy that involves buying and holding four different options at three different strike prices. 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 volatility.
context_section_description: 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.
  A short iron butterfly option strategy consists of the following options:
  Long one out-of-the-money put: strike price of X − a
  Short one at-the-money put: strike price of X
  Short one at-the-money call: strike price of X
  Long one out-of-the-money call: strike price of X + a
  where X = the spot price (i.e. current market price of underlying) and a > 0.
caption: Payoff Graph of Iron Butterfly Option Strategy Broken Down
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