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Iron butterfly

Short the at-the-money call and put, then BTO (buy to open) wings. A credit that wants the stock to pin the body.

An iron butterfly is a short straddle with wings. STO (sell to open) the same-strike call and put. BTO (buy to open) a lower put and a higher call. You collect a credit. Max gain if price finishes at the body. Max loss is the wing width minus that credit.

XYZ $150. STO (sell to open) the $150 call and $150 put. BTO (buy to open) the $140 put and $160 call. Credit $4. Pin $150: keep $400. Hit a wing: lose about $600.

Tighter than an iron condor. The lab peaks at the body. Slide away from $150 and the credit spends quickly.

Butterfly — paid only if it pins the bodyBuy the wings, sell two at the middle. Small debit. Peak if price lands on the body at expiration.Butterfly — paid only if it pins the bodyTeaching sketchbodywingwing
BTO 1× $550 and 1× $570. STO 2× $560. Debit $1.60. Pin $560: about +$840. Miss: lose $160. Journal qty 2 on the body.

Teaching lab

Short the body, long the wings

XYZ $150. STO $150 call and put. BTO $140 put and $160 call. Credit $4. Pin the body.

P/L / share
-2.51
×100
-251
Delta
-0.009
Gamma
-0.0259
Theta / day
+0.0491
Vega / vol pt
-0.1196

P/L / share

vs the lesson entry

-2.51-5.96$110$130K $150$170$190

Delta

share-equivalent

0.200.00-0.17$110$130K $150$170$190

Gamma

peaks near the strikes

0.0140.000-0.026$110$130K $150$170$190

Theta / day

clock

0.0490.000-0.024$110$130K $150$170$190

Vega / vol pt

fear priced in

0.0580.000-0.120$110$130K $150$170$190

Rho / rate pt

small at 30 days

0.0290.000-0.016$110$130K $150$170$190

Keep $400 if it pins. Hit a wing: about −$600. Teaching splits of the $4 credit.

Try it: Analyze this structure

Tickets for this structure

BTO (buy to open) · STO (sell to open) · BTC (buy to close) · STC (sell to close). Illustrative fills only. We never send these orders.

STO (sell to open)

Open a short

Sell to open (the body)

XYZ $150. STO (sell to open) 1× 30-DTE (days to expiration) $150 call and $150 put. You want the pin.

BTO (buy to open)

Open a long

Buy to open (the wings)

BTO (buy to open) $140 put and $160 call. Credit $4.00. Max gain $400. Max loss ≈ $600.

BTC (buy to close)

Close a short

Buy to close (the body)

Flatten: BTC (buy to close) both shorts and STC (sell to close) both wings. Leave a short and you are naked that strike.

STC (sell to close)

Close a long

Sell to close (the wings)

STC (sell to close) both longs with the shorts. Four legs together unless you mean to change the structure.

Condor vs butterfly

Iron condor shorts two different strikes and wants a range. Iron butterfly shorts the same strike both ways and wants a pin. Same defined-risk credit idea, tighter peak. Not the debit call butterfly in the other lesson.

How the Greeks move

Short the body, long the wings: delta is near zero if you pin, you collect theta, you are short vega. Slide off $150: gamma and P/L (profit and loss) wake up faster than a wide condor.

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Teaching numbers only — not a live quote, not a fill, not financial advice. All lessons · Back to Practice · Replay · Journal.