Iron Butterfly
Pin risk, defined risk
A short straddle at the money with both wings bought further out. Richer premium than an iron condor, and a narrower profit zone.
Payoff at expiry
Illustrative · NIFTY @ 25000Max Profit
₹8,836
Max Loss
₹2,414
Breakeven
24882 / 25118
How it's built
Sell an ATM put and ATM call (the short straddle), then buy a put and a call further out on either side as protection. The short strikes sit exactly at spot instead of a strike or two away.
When to deploy it
A sharper version of the range-bound thesis than an iron condor. You are betting spot pins close to today's level specifically, rather than merely that the range holds, in exchange for more premium collected.
Worked example
Say NIFTY is trading around 25,000 with a few sessions left before expiry. You buy the 24850 put for ₹49, sell the 25000 put for ₹109, sell the 25000 call for ₹109, and buy the 25150 call for ₹50 — a net credit of ₹8,836 for one lot of 75.
At expiry, the position is worth the most once NIFTY is on the right side of 24882 or 25118 — up to ₹8,836 per lot. Move against that line instead and the worst case is capped at ₹2,414 per lot, not open-ended.
Mistakes that break this strategy
- Running it with the same wing-width intuition as an iron condor. The ATM short strikes make the profit zone inherently tighter, and it needs respecting as such.
- Placing it without a view on where spot actually pins. Unlike a condor, there is no room for "somewhere in a range"; it is "close to here, specifically".
- Ignoring gamma risk into the final session. An ATM short-straddle core means P&L swings hardest exactly when expiry is closest.
More neutral strategies
See it read live, not just diagrammed
DeltaK reads Aegis/Zenith wall migration and RRG rotation live across NIFTY, BANKNIFTY, FINNIFTY and MIDCPNIFTY. Sign in and watch it work in Paper mode.