Iron Butterfly Calculator

What Is an Iron Butterfly?

An iron butterfly combines an at-the-money straddle with protective wings on both sides. It's a neutral strategy—the short iron butterfly (more common) collects a credit and profits when the stock pins near the short strike, while the long iron butterfly pays a debit and profits from big moves in either direction.

Short Iron Butterfly (Credit)

A short iron butterfly is built by selling an ATM put and an ATM call at the same strike, then buying an OTM put below and an OTM call above for protection. The put side (short ATM put + long OTM put) resembles a bull put spread, while the call side (short ATM call + long OTM call) resembles a bear call spread. You collect a net credit and profit when the stock stays near the short strike through expiration.

Key Characteristics

• Max Profit: Limited to the total premium you receive to enter the trade. Achieved when the stock pins exactly at the short strike at expiration—rare, so most traders close early.
• Max Loss: (Wing width − net credit) × 100 × number of contracts. Occurs when the stock closes at or beyond either of the long strikes at expiration.
• Upper Breakeven: Short strike + net credit
• Lower Breakeven: Short strike − net credit
• Outlook: Neutral—expecting minimal movement

How to Read the P/L Chart

The cyan line (T+0) shows your theoretical P/L at trade entry. Before expiration, the curve is smoother because all four options still have time value. When the stock is near the short strike, time decay works in your favor. Near the wings, this reverses.

T+0 means "today plus 0 days," while T+30 would mean "today plus 30 days." It's a common convention for payoff diagrams that show multiple points in time.

The white line (Expiration) shows your profit or loss at expiration. If the stock finishes exactly at the short strike, all four options expire worthless, and you keep the full credit. As the stock moves away from the short strike, profits decline. Beyond the long strikes, your loss is capped. This payoff graph highlights the iron butterfly's defined risk on both sides and peak profit at the center strike.

Using This Calculator

1. Stock Price: The price of the stock at trade entry
2. Long Put Strike: The lowest strike, where you buy a put
3. Short Strike: The middle strike, where you sell a put and a call
4. Long Call Strike: The highest strike, where you buy a call
5. Net Credit: The premium you receive to enter the iron butterfly. To find your total potential profit, multiply the net credit by 100 and by the number of iron butterflies. For example, a $4.00 net credit with 2 iron butterflies sold is $4.00 × 100 × 2 = $800 max profit potential.
6. Days to Expiration: How much time is left until all options expire
7. Implied Volatility: The market's expectation of future stock price movements, as implied by the stock's option prices.

Long Iron Butterfly (Debit)

A long iron butterfly is the inverse—you buy an ATM straddle and sell an OTM put, and an OTM call to reduce your cost. You profit when the stock makes a big move in either direction.

Key Characteristics

• Max Profit: (Max wing width − net debit) × 100 × number of contracts. Achieved when the stock closes at or beyond either short strike at expiration.
• Max Loss: Limited to the total amount you pay to enter the trade. Occurs when the stock closes exactly at the long strike at expiration.
• Upper Breakeven: Long strike + net debit
• Lower Breakeven: Long strike − net debit
• Outlook: Expecting a large move, direction uncertain

Short Iron Butterfly vs. Short Iron Condor

Both are neutral strategies that profit from range-bound stocks. A short iron butterfly has the short put and short call at the same strike (ATM), creating a narrower profit zone but collecting more credit.

A short iron condor separates the short strikes for a wider profit zone but a smaller credit. If you expect the stock to pin near a specific price, the iron butterfly offers better risk/reward. If you want a wider profitability range, the iron condor provides that—but with lower profit potential and higher risk. See our iron condor guide for a detailed comparison of these strategies.

A Note on Early Assignment

Any short option can be assigned early, usually when it is deep ITM near expiration or when an ITM short call approaches an ex-dividend date. If the short put is assigned, you buy 100 shares. If the short call is assigned, you sell (short) 100 shares. Either way, the spread structure protects you—your long options still cap your risk.

Note that assignment through expiration is different. If only a short option expires ITM at expiration, you'll end up with long stock if the short put is assigned, and short stock if the short call is assigned.

After expiration, you'll no longer have the protection of the long options, leaving you exposed to a stock position. It's recommended to close before expiration if either short option is ITM or close to it.

Related Calculators

• Straddle Calculator — Same strike call and put positions
• Strangle Calculator — Different strike OTM call and put positions
• Iron Condor Calculator — Wider profit zone, separated short strikes

Related Guides

• Short Straddle Guide — Undefined-risk alternative with higher profit potential
• Long Straddle Guide — Buy an iron butterfly without the wings