Real Example (July 2025)
An iron butterfly involves selling an at-the-money straddle (call and put) and buying one out-of-the-money call and one out-of-the-money put. It is a limited-risk, limited-reward neutral strategy.
- Stock: XYZ Corp
- Outlook: Low volatility / range-bound
- Setup: Sell 1 $100 Call @ $4.00, Sell 1 $100 Put @ $4.00, Buy 1 $105 Call @ $1.00, Buy 1 $95 Put @ $1.00
- Net Credit: $6.00 ($600 per contract)
- Max Gain: $600
- Max Loss: $400
- Breakeven: $94 and $106
