Short Iron Butterfly
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Sep-13-2024
Short Iron Butterfly
Market View
Range-bound, not moving
The Trade
Sell a put and call at the same strike near the stock price. Your view is that the stock wont go down or up. Buy a lower Put and a higher call for protection on both sides just in case you're wrong.
Premium
Receive
Margin
Required
When To Do
- If the stock will stay still and expire near the sell call and sell put strike.
- Avoid trending markets
- Avoid selling low IV
Pros
- Delta Neutral - Immune to small moves.
- Make money if nothing happens
- Limited loss
- Low vega risk and Theta risk
Cons
Time and Volatility
- Gains time value everyday
- Loses moderately if IV goes up