Iron Butterfly – Precision with Risk Control

An Iron Butterfly is a neutral strategy designed for traders who want range-bound profit with defined risk. It involves selling an ATM Call and Put, while buying protection options on both sides. When to use: Best used when you expect the price to stay close to a specific level until expiry. Historic Example: In APR 2022, assume

was expected to stay near ₹255 for MAY expiry. • Sell 255 Call @ ₹8 • Buy 265 Call @ ₹4 • Sell 255 Put @ ₹6 • Buy 245 Put @ ₹3 Net premium received = ₹7 Profit & Loss: Max Profit = Net premium = ₹7 Max Loss = Strike gap − Premium = (260 − 255) − 7 = ₹3 (limited) Key takeaway: Iron Butterfly demands accuracy, but it offers controlled risk, unlike a naked straddle 📌 Disclaimer: This content is for information only and not investment advice. Investments in securities market are subject to market risks. Read all the related documents carefully before investing. Please consult a SEBI-registered advisor before making any investment decisions.