A short straddle at one strike, insured by two long wings.
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P&L at the selected date, priced with Black–Scholes. At 0 DTE the curve is pure intrinsic value. A tool, not a recommendation.
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What an Iron Butterfly is
Structure: Short put + short call at the same strike, plus long put and long call wings equidistant below and above. Same expiry.
An iron butterfly is a short straddle at a single strike with the tails bought back. The premium is larger than an iron condor's because the short strikes sit at the money instead of far away — and so is the chance of finishing outside the profitable band.
The payoff peaks in a sharp point at the short strike instead of a flat shelf. That makes it a precision instrument: more credit, less room, and breakevens that sit close to the middle.
The numbers
Max profit
net credit received, if the stock finishes exactly at the short strike
Max loss
wing width − net credit
Breakeven
short strike − net credit · short strike + net credit
These are at-expiration formulas. The chart above prices the structure at the selected date with Black–Scholes — at 0 DTE the curve is pure intrinsic value. A tool, not a recommendation.
When traders use it
You expect the stock to pin close to a specific strike into expiry.
You want more premium than an out-of-the-money condor offers and accept a narrower band.
You want the loss defined on both sides.
What works against it
The profitable band is narrow — a small move can take the position past a breakeven.
Pin risk: at expiry, one leg can be assigned while the others expire worthless, leaving unwanted stock.
Maximum profit needs an exact landing, so anything near the strike is worth managing rather than holding to the bell.
Iron Butterfly questions
What is the difference between an iron butterfly and an iron condor?
Where the short strikes sit. The butterfly writes them at the same strike, so it collects more credit and has a narrower profit range. The condor writes them apart, collecting less for a wider flat zone.
What is the max loss?
The wing width minus the net credit. With $5 wings and $2.10 credit the worst case is $2.90 per butterfly, reached beyond either long wing.
Where are the breakevens?
The short strike minus and plus the net credit. A $100 strike with $2.10 credit breaks even at $97.90 and $102.10.
What is pin risk?
When the stock finishes at or very near the short strike, you can be assigned on one leg while the long wings expire worthless. The calculator shows the expiration value at that exact point — the risk of what happens to the assignment afterwards is not in the curve.
If it goes against you: common mitigations
Every entry below is a response traders commonly plan before entry, with what it actually costs. Which one is right depends on why you entered and what you now expect — that is a judgement the calculator cannot make for you, and none of this is advice.
Roll the whole structure up or down
Close all four legs and reopen the butterfly centred on the new price.
Pros: Re-aims the pin at where the stock actually is, often for a similar debit or credit.
Cons: The original debit is written off, and the new position needs the stock to sit still again.
Consider when: The stock has moved decisively and a new level looks more likely than the old one.
Close early during a pin
Buy back the structure while the stock is near the short strike instead of holding to expiration.
Pros: Avoids assignment on the two short contracts and locks in the peak area of the curve.
Cons: The exit price depends on the market's bid for the package, which can be wide.
Consider when: The stock is at or near the short strike with little time left.
Add wings further out
Buy additional further-out options to widen the insured zone.
Pros: Reduces how much a big move can cost.
Cons: Costs money exactly when you are already wrong, and lowers the maximum.
Consider when: The position is large relative to the account and the move is accelerating.
Accept the defined loss
Let the butterfly expire at its maximum loss.
Pros: The maximum was known before entry and no repair money is spent.
Cons: The full risk is realised and the stock would have to move back a long way to matter.
Consider when: The stock is outside the wings and there is no time left for a return.