Iron Butterfly
Sell an ATM Straddle and buy OTM protective wings (Call & Put) to create a defined-risk, high-credit neutral strategy.
Interactive Payoff Curve & Greeks Simulation
Visualize the theoretical profit & loss at expiry vs T+0 immediate day curves. Drag the simulation slider to stress-test your trade.
Option Payoff Curve & Greeks
Net Option Greeks (Sensitivity Profile)
Values per 1 Lot standard unitMulti-Leg Position Structure (4 Legs)
| Action | Instrument / Strike | Type | Expiry | Approx Delta | Est. Premium | Qty Ratio |
|---|---|---|---|---|---|---|
| BUY | 24,000 PE (Long Wing) | PUT | Monthly Expiry | -0.15 | ₹50 | 1x |
| SELL | 24,500 PE (ATM Short) | PUT | Monthly Expiry | -0.50 | ₹240 | 1x |
| SELL | 24,500 CE (ATM Short) | CALL | Monthly Expiry | +0.50 | ₹250 | 1x |
| BUY | 25,000 CE (Long Wing) | CALL | Monthly Expiry | +0.15 | ₹60 | 1x |
How the Structure Works
Generates maximum theta decay with built-in disaster insurance wings.
The Iron Butterfly is a defined-risk version of the Short Straddle. You sell the ATM Call and Put (collecting huge premium) and buy OTM Call and Put wings 500 points away. This caps your maximum loss strictly while offering massive 1:2 to 1:3 Return on Capital if the market pins near the center.
Institutional Strike Selection Rules
Phased Execution Blueprint
Follow this structured sequence to eliminate emotional hesitation during order entry, lifecycle management, and final exit.
High IV Range Pin
Deploy when expecting market to pin near major psychological round number.
Interactive Margin & Position Size Calculator
Calculate exact lot sizing based on the 1-2% risk rule to preserve capital against Black Swan events.
Options Position Size & Max Risk Calculator
Total net liquid equity in your brokerage account
Recommended: 1.0% - 2.0% for disciplined longevity
Wing width max loss or defined mental/system SL
Rigorous Risk Rules & Adjustment Protocols
Non-negotiable parameters for stop-loss triggers, portfolio caps, and firefighting adjustments when market tests your strikes.
- Roll untested wing closer to ATM.
SEBI hedged margin ~₹45,000 per lot.
NIFTY 24500 Iron Butterfly Trade Walkthrough
Nifty consolidated at 24,500 round number.
Sold 24500 CE/PE @ ₹490 / Bought 24000 PE & 25000 CE @ ₹110 (Net Credit = ₹380 = ₹9,500 on 25 qty)
- Captured 50% ROI on margin with zero unlimited risk.
Common Mistakes to Avoid
Why it happens: Greed.
Solution: Take profit at 40-50%.
Institutional Pro Tips
Iron Butterfly FAQs
How is Iron Butterfly different from Iron Condor?
Iron Butterfly sells ATM options at the same strike (higher credit, tighter target). Iron Condor sells OTM options at different strikes (lower credit, wider target).
Alternative & Complementary Strategies
Sell an ATM Call and an ATM Put at the exact same strike to collect maximum premium, betting the market will stay tightly pinned.
Sell an OTM Call Spread and an OTM Put Spread simultaneously to collect double premium in a range-bound market with strictly defined risk.
Buy 1 lower wing, sell 2 center body, and buy 1 higher wing options for a small debit, targeting a pin at the center strike.