The iron butterfly, leg by leg, with two real trades
The hedg3 Team
An iron butterfly is four options on one expiry: a put and a call sold at the same strike, and one put and one call bought further out to cap the loss. It opens for a larger credit than an iron condor and keeps the most when the stock finishes exactly on the sold strike. The gap between a sold strike and the bought strike beyond it is the wing: $100 to $95 is $5 a share, $500 on 100 shares.
Iron butterfly
CreditQuick-Hit AgentThe numbers at expiry
- Max profit: $360, the credit, with XYZ at exactly $100.
- Max loss: $140 below $95 or above $105: the $500 wing less the $360 credit.
- Breakevens: $96.40 and $103.60: the strike less and plus the $3.60 credit.
- Collateral: $140 held at entry.
Why the max loss is $140
Two numbers set it: the credit and the wing. The two sold options bring in $600 and the two bought options cost $240, so the butterfly opens for a $360 credit. Below $95 the 100 put is assigned and the 95 put is exercised: 100 shares bought at $100 and sold at $95, a $500 loss, the full wing. The calls expire and the $360 credit is kept.
| Sell the 100 put | +$300 |
| Sell the 100 call | +$300 |
| Buy the 95 put | −$120 |
| Buy the 105 call | −$120 |
| Net credit | +$360 |
| 100 put assigned: buy 100 XYZ at $100 | −$10,000 |
| 95 put exercised: sell 100 XYZ at $95 | +$9,500 |
| The 100 and 105 calls expire | $0 |
| Credit kept from the open | +$360 |
| Max loss | −$140 |
Where assignment happens
Between $95 and $100 the 100 put is assigned: you own 100 shares at $100, $10,000. Between $100 and $105 the 100 call is assigned: you are short 100 shares at $100, which needs a margin account. Past either wing the legs cancel at the $140 maximum. Closing before expiry avoids both zones.
Winner: TFC, Sep 21 to Oct 15
| Leg | Contract | Price |
|---|---|---|
| Buy | TFC 42.5 put | $0.10 |
| Sell | TFC 47.5 put | $0.775 |
| Sell | TFC 47.5 call | $2.375 |
| Buy | TFC 52.5 call | $0.30 |
- Opened
- Sep 21, 2026, 10:30 AM ET · TFC $48.935
- Net credit
- $2.75 · $275 received
- Target
- Buy back at $1.38 · +$137
- Stop
- $5.00
- Closed
- Oct 15, 2026, 3:59 PM ET · TFC $46.4906
- How
- Time stop
TFC was at $48.935, $1.435 above the 47.5 body, when the butterfly opened for a $2.75 credit. TFC slid to $46.49 by Oct 15, still inside the wings, and the time stop bought it back at $1.475 the day before expiry: +$127.50 on $225 at risk.
Loser: KHC, Sep 11 to Oct 9
| Leg | Contract | Price |
|---|---|---|
| Buy | KHC 20 put | $0.035 |
| Sell | KHC 25 put | $1.145 |
| Sell | KHC 25 call | $0.635 |
| Buy | KHC 27.5 call | $0.11 |
- Opened
- Sep 11, 2026, 12:00 PM ET · KHC $24.475
- Net credit
- $1.64 · $164 received
- Target
- Buy back at $0.82 · +$82
- Stop
- $3.27
- Closed
- Oct 9, 2026, 3:50 PM ET · —
- How
- Time stop
KHC was at $24.475, just under the 25 body, when the butterfly opened for a $1.64 credit. Its wings are uneven: $5 on the put side, $2.50 on the call side. By Oct 9 the cost to close had risen to $2.745, and the time stop bought it back: −$110.50 of the $336 at risk. The row does not carry KHC's price at the exit.
Every trade, on the record
The two trades above are the Quick-Hit Agent's most recent settled winner and loser. Every iron butterfly it closes, winners and losers, is on the public track record.
The full strategy page covers the Greeks and when it is used: iron butterfly. Related: iron condor.
