Long Iron Butterfly option strategy
Long Iron Butterfly is a Volatility strategy. It involves very high risk for limited reward.
Payoff at expiry
Nifty, lot size 65 · Nifty future 23,104 · 19 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| SELL | OTM Put | 23,050 | 1 | 65 | ₹63.61 |
| BUY | ATM Put | 23,100 | 1 | 65 | ₹86.13 |
| BUY | ATM Call | 23,100 | 1 | 65 | ₹89.63 |
| SELL | OTM Call | 23,150 | 1 | 65 | ₹66.67 |
How it works
- Sell 1 OTM put at the 23,050 strike for ₹63.61, collecting the premium.
- Buy 1 ATM put at the 23,100 strike for ₹86.13, paying the premium.
- Buy 1 ATM call at the 23,100 strike for ₹89.63, paying the premium.
- Sell 1 OTM call at the 23,150 strike for ₹66.67, collecting the premium.
- You pay a net ₹2,956 upfront for the position. This is the most you can lose.
Below 23,049 you profit, up to ₹294.
Between 23,049 and 23,145 you lose, up to ₹2,761.
Above 23,145 you profit, up to ₹294.
Set-up: Sell 1 lot OTM Put, Buy 1 lot ATM Put, Buy 1 lot ATM Call and Sell 1 lot OTM Call.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 21,700 | −6% | +₹294 |
| 22,400 | −3% | +₹294 |
| 22,850 | −1% | +₹294 |
| 23,100 | Unchanged | −₹2,956 |
| 23,350 | +1% | +₹294 |
| 23,800 | +3% | +₹294 |
| 24,500 | +6% | +₹294 |
How the Greeks affect it
When to use
Long Iron Butterfly is a combination of Bear Put Spread and Bull Call Spread. With Short Iron butterflies, you are looking for big move in stock either direction. You are expecting surge in volatility.In scenario where strike difference is not equal it is known as Modified Long Iron Butterfly.
- It is executed when stock had been range bound for long time and is about to give a breakout/breakdown. It is idle to trade long term option as negative time decay impact will be least.
Things to watch
- Time decay is generally harmful to the option position.
Long Iron Butterfly: questions
What is a Long Iron Butterfly strategy?
Long Iron Butterfly is a Volatility strategy. It involves very high risk for limited reward.
When should you use a Long Iron Butterfly?
Long Iron Butterfly is a combination of Bear Put Spread and Bull Call Spread. With Short Iron butterflies, you are looking for big move in stock either direction. You are expecting surge in volatility.In scenario where strike difference is not equal it is known as Modified Long Iron Butterfly.
How do you set up a Long Iron Butterfly?
Sell 1 lot OTM Put, Buy 1 lot ATM Put, Buy 1 lot ATM Call and Sell 1 lot OTM Call.
What is the maximum profit of a Long Iron Butterfly?
Your maximum reward is the difference between any adjacent strike prices less the net debit. (Strikes are equip-distance from each other).
What is the maximum loss of a Long Iron Butterfly?
Maximum risk is your net debit you pay.
What is the breakeven of a Long Iron Butterfly?
With Nifty at 23,104, the example on this page breaks even at 23,049 and 23,145 at expiry.
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