Iron Butterflies
Much like the relationship of the condor to the iron condor, a butterfly has
its synthetic equal as well: the iron butterfly.
Short Iron Butterfly
Long one put with strike A; short one put with a higher strike, B; short one
call with strike B; long one call with a strike higher than B, C. The options
are on the same security and in the same expiration cycle. The distances
between the strikes of the put spread and between the strikes of the call
spread are equal.
Short Iron Butterfly Example
Buy 1 XYZ December 50 put (A)
Sell 1 XYZ December 60 put (B)
Sell 1 XYZ December 60 call (B)
Buy 1 XYZ December 70 call (C)
Long Iron Butterfly
Short one put with strike A; long one put with a higher strike, B; long one
call with strike B; short one call with a strike higher than B, C. The options
are on the same security and in the same expiration cycle. The distances
between the strikes of the put spread and between the strikes of the call
spread are equal. The put debit spread has the same distance between the
strike prices as the call debit spread.
Long Iron Butterfly Example
Sell 1 XYZ December 50 put
Buy 1 XYZ December 60 put
Buy 1 XYZ December 60 call
Sell 1 XYZ December 70 call
These spreads were defined in terms of both long and short for each
strategy. Whether the spread is classified as long or short depends on
whether it was established at a credit or a debit. Debit condors or butterflies