Iron Butterfly
Pin risk, defined risk
A short straddle at the money with both wings bought further out — richer premium than an iron condor, a narrower profit zone.
Payoff at expiry
Illustrative · NIFTY @ 25000Max Profit
₹17,625
Max Loss
₹6,375
Breakeven
—
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're not just betting the range holds, you're betting spot pins close to today's level specifically, 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 ₹35, sell the 25000 put for ₹150, sell the 25000 call for ₹180, and buy the 25150 call for ₹60 — a net credit of ₹17,625 for one lot of 75.
At expiry the position's value is capped at ₹17,625 per lot on the upside and ₹6,375 per lot on the downside, regardless of where NIFTY finishes.
Mistakes that break this strategy
- Running it with the same wing-width intuition as an iron condor — the ATM short strikes mean the profit zone is inherently tighter and needs respecting as such.
- Placing it without a real view on where spot actually pins — unlike a condor, there's no room for "somewhere in a range", it's "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
Quantum Horizon reads Aegis/Zenith wall migration and RRG rotation live across NIFTY, BANKNIFTY, FINNIFTY and MIDCPNIFTY — sign in and watch it work in Paper mode.