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Long Iron Butterfly

Long Iron Butterfly

  • date-icon Sep-13-2024

Long Iron Butterfly

Market View

A significant move up or down

The Trade

Buy a put and call at the same strike near the stock price. Your view is that the stock will go down or up. Sell a lower put and a higher call on both sides for reducing premium

Premium

Pay

Margin

Required

When To Do

  • When the stock is going to move big in one direction
  • Avoid buying high IV

Pros

  • Lower premium than straddle
  • Low Vega risk and theta risk

Cons

  • Low probability of success

Time and Volatility

  • Loses time value every day
  • Gains slightly if IV goes up