Options Income
Iron Butterfly
Sell a call and a put at the same strike, buy a call and a put further out on each side for protection. The payoff is a single peak at that one strike instead of a flat-topped range like an iron condor.
Drag the wing, watch the tent and the heat bar
The body is fixed at the current price, that's the strike both short options share. Drag the right gold handle (or use the slider) and both wings move together, symmetrically. The strip under the price axis is a probability heat bar, brighter and greener where the payoff is a profit and more likely, brighter and redder where it's a loss and more likely, fading out toward the edges where either outcome gets rare.
Drag the right gold circle · left wing mirrors automatically · body strike is fixed at the current price
How it works
- Four legs, one strike in the middle. The short call and short put both sit at the current price. The long call and long put sit the same distance above and below it, the wing width set by the slider or the drag handle.
- Max profit is the net credit, and it only happens exactly at the body strike. Every point price finishes away from that strike gives back a dollar of the credit, in either direction, until the wings are reached.
- Max loss is the wing width minus the credit, capped there. Once price passes either wing, the long option on that side offsets the short option dollar for dollar, so the loss stops growing no matter how far price runs from there.
- Two breakevens, symmetric around the body strike. They sit at the strike plus the credit and the strike minus the credit. Widen the wings and both the credit and the breakeven distance grow together, which is exactly what the heat bar is showing changing shape.
Where this breaks
The profit zone is a lot narrower than an iron condor's
An iron condor sells its two short strikes apart from each other, giving the trade a flat-topped zone with real width to it. An iron butterfly sells both short options at the same single strike, so the profit zone is only ever as wide as the credit collected on either side of one point. Drag the wings in tight and the heat bar's green stretch narrows fast, even though the credit received also shrinks with it. The tent shape means price has to land close to one specific number, not somewhere in a wider range, for the trade to come anywhere near its max profit.