Iron Butterfly
Also known as: Short Iron Butterfly
Neutral with high implied volatility — want maximum premium collection from selling an ATM straddle while using wings to create defined risk
Risk Profile at a Glance
How to Construct the Iron Butterfly
- 1.Sell 1 ATM call at strike B
- 2.Sell 1 ATM put at strike B
- 3.Buy 1 call at strike C (higher, same width)
- 4.Buy 1 put at strike A (lower, same width)
- 5.Net credit (wider than short straddle due to wings)
Understanding the Iron Butterfly
The iron butterfly combines a short straddle with two wing options to define the maximum risk. You sell both the ATM call and put (collecting maximum premium from the at-the-money strikes) and buy options above and below to cap losses. The result is a defined-risk version of the short straddle with a higher probability of profit because the credit received is large relative to the wings purchased. Maximum profit is the net credit, achieved when the stock pins exactly at the ATM strike.
Maximum loss is the wing width minus the credit. The iron butterfly is the single-most efficient premium-collection strategy in high-IV environments — the ATM options carry the highest extrinsic value, so selling them generates the most premium. It is widely used after earnings or other IV-expansion events when the stock is expected to consolidate. In EdgeOS terms, after a bull count reset from 9+ (exhaustion count) and the stock stabilizes near the upper ATR trigger, an iron butterfly targeting that price level can be a high-probability income trade..
When to Use It — EdgeOS Signal Integration
- ✓Use when no active bull or bear EdgeOS count — the stock is in chop / reset mode
- ✓Extension score near zero — stock is pinned at the ATR mid-level, no directional bias
- ✓Market breadth is neutral (SCTR breadth 45–55%) — range-bound conditions expected
Today's Iron Butterfly Candidates
Updated Aug 28, 2026 · refreshes every 30 minStocks currently showing neutral EdgeOS signals that match Iron Butterfly entry conditions. SCTR > 9 (bullish breadth), extension Tight–Mod (room to run), fresh bull count 1–3.
Compare with Similar Strategies
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Frequently Asked Questions
What is the Iron Butterfly options strategy?
The iron butterfly combines a short straddle with two wing options to define the maximum risk. You sell both the ATM call and put (collecting maximum premium from the at-the-money strikes) and buy options above and below to cap losses.
When should I use the Iron Butterfly?
Neutral with high implied volatility — want maximum premium collection from selling an ATM straddle while using wings to create defined risk
What is the maximum loss on the Iron Butterfly?
The maximum loss is fully defined at entry: the net debit paid (for debit strategies) or the spread width minus the credit received (for credit spreads). You can never lose more than this amount.
How does the Iron Butterfly compare to similar strategies?
The Iron Butterfly is a neutral credit strategy. Compared to the Short Straddle (neutral, credit), the Iron Butterfly has limited max risk and limited max reward. Your choice depends on your directional bias, IV environment, and risk tolerance. The TraderValue strategy comparison tool lets you see the exact payoff differences side by side.
What stocks are good Iron Butterfly candidates today?
As of Aug 28, 2026, stocks with neutral EdgeOS signals matching Iron Butterfly conditions include: MDYG (SCTR 9.0, bear b0, Tight extension); SHOP (SCTR 9.0, bear b0, Ext extension); AIZ (SCTR 9.0, bear b0, Ext extension). These are screened live from 3,000+ symbols and refresh every 30 minutes during market hours. See winstockoptions.com/scans for the full live list.