Iron Butterfly

An options strategy with limited risk and limited profit potential that involves both a long (or short) straddle, and a short (or long) strangle. An iron butterfly contains four options; it is equivalent to a regular butterfly spread that contains only three options. For example, a short iron butterfly might include:

• Buy 1 XYZ May 60 call and 1 May 60 put

• Write 1 XYZ May 65 call and 1 XYZ May 55 put