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Home / Education / Futures & Options Strategy Guide / Long Iron Butterfly

Long Iron Butterfly

Overview

Pattern evolution:
Long Iron Butterfly

Learn 21 futures and options trading strategies in this complimentary,  easy-to-read guide. Download Now >>

When to use: When the market is either below A or above C and the position is underpriced with a month or so left. Or when only a few weeks are left, market is near B, and you expect an imminent breakout move in either direction.

Profit characteristics: Maximum profit equals (B – A) less the net debit to create the position. Occurs when market, at expiration, is below A or above C.

Loss characteristics: Maximum loss occurs if market is at B at expiration. Amount of that loss is net debit to create the position. Break-evens are at B + and – initial debit.

Decay characteristics: Decay negligible until final month, during which distinctive pattern of butterfly forms. Maximum loss is at B. If you are away from (A-C) range entering last month, you may wish to hold the position.

CATEGORY: Precision
Long straddle B, short strangle at AC
Short put A, long put B, long call B, short call C

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Additional Futures & Options Strategies

  • How to Use This Guide
  • Long Futures
  • Long Synthetic Futures
  • Short Synthetic Futures
  • Long Risk Reversal
  • Short Risk Reversal
  • Long Call
  • Short Call
  • Long Put
  • Short Put
  • Bull Spread
  • Bear Spread
  • Long Butterfly
  • Short Butterfly
  • Short Iron Butterfly
  • Long Straddle
  • Short Straddle
  • Long Strangle
  • Short Strangle
  • Ratio Call Spread
  • Ratio Put Spread
  • Ratio Call Backspread
  • Ratio Put Backspread
  • Box or Conversion

Contents Courtesy of CME Group.

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