Straddle-width iron fly
An intraday iron butterfly on NIFTY whose wing width is set by the market itself. At 09:35 it sells the ATM straddle and buys wings placed one straddle price above and below, the move the options are pricing in. Wings are wide when volatility is high or expiry is far, narrow on expiry day. Each short leg has its own 30% stop.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
Against the textbook view of an iron fly, it earned on trend days in this test: ₹1,54,150 over 70 trades with a 74% win rate. On a one-way day, the short leg on the losing side is stopped at 30%, the other short decays to almost nothing, and the bought wing on the trending side gains, so the per-leg stop turns the fly into a winning directional spread. Choppy wide-range days lost ₹84,816 over 66 trades, as the swing stops one short and the reversal stops the other. Quiet sessions also lost ₹42,033 over 108, as small moves still reached the 30% stops on ATM legs.
About this strategy
- Every trading day at 09:35, read the price of the ATM straddle (call plus put) on the nearest NIFTY weekly expiry.
- Sell the ATM call and ATM put.
- Buy a call wing one straddle price above ATM and a put wing one straddle price below, each at the nearest listed strike.
- Give each short leg its own stop at 30% above its sale price; only that leg is bought back and the rest stays open.
- Close everything still open at 15:15.
Why traders use it
The ATM straddle price is a quick, model-free estimate of how far the market expects the index to travel by expiry. Placing wings at that distance makes the hedge adapt without extra settings: it gives the trade more room on volatile days and stays tight on expiry day when the expected move is small. Compared with a naked straddle, the bought wings cap the worst case and cut the margin needed.
The year in plain words
With default settings on NIFTY from 1 Oct 2025 to 30 Sep 2026, the iron fly traded 246 sessions and won 54%, for ₹22,534 before costs and a profit factor of 1.08. Every position reached 15:15 as a whole, with individual short legs stopped along the way. The early months carried the year: October to December made ₹40,043, while July to September lost ₹21,108. Four legs in and out every day mean eight orders, and after ₹20 per order and bid-ask slippage the result became a ₹43,012 loss.
What the settings do
Risks
- Eight orders a day make brokerage and spread large enough to turn a gross profit into a net loss.
- After one short leg is stopped, the position becomes a directional spread exposed to a reversal.
- On expiry day the straddle is cheap, so the wings sit very close and gamma near ATM is extreme.
- Iron flies need margin for the short legs even though the wings reduce it.
Who it suits
Traders who like defined-risk option selling and want the hedge to adjust itself to volatility, with automated execution for four legs daily. Those with low per-order costs are least affected by the cost drag seen here.
Questions traders ask
What is a straddle-width iron fly?
It is an iron butterfly whose wings are placed one ATM straddle price away from the strike. If the straddle costs 200 points, the wings go about 200 points above and below, so their distance follows the market's expected move.
Is the straddle-width iron fly profitable?
On NIFTY from 1 Oct 2025 to 30 Sep 2026 it made ₹22,534 before costs but lost ₹43,012 after ₹20 per order and bid-ask slippage, with statutory charges extra. Daily four-leg trading made costs decisive. Past results do not guarantee future ones.
Why use the straddle price for the wings?
The straddle price roughly equals the move the market expects by expiry. Using it means no extra volatility setting is needed: wings widen automatically when options are expensive and narrow when they are cheap.
Can it be traded only on expiry day?
Yes. Set “Days” to expiry and it trades only on the NIFTY weekly expiry day, normally Tuesday, when time decay is fastest and the straddle, and so the wing distance, is smallest.