[Directional | Limited Profit | Limited Loss] The long iron butterfly options spread anticipates volatility to rise and the underlying security to move significantly in either direction. The long iron butterfly option strategy involves selling a put option, buying a put and a call option and selling a call option, all at equidistant higher strike prices. The long iron butterfly strategy is a combination of a bear put and a bull call spread. Maximum loss is the difference between the premium paid for the long call and long put minus the premium received for the short call and short put (Net Debit). Maximum profit is the difference between the center and outer strike values minus the Net Debit. The long iron butterfly strategy succeeds if the underlying security breaks through the range, trading below the lower downside breakeven (middle strike – Net Debit) or above the upside breakeven (middle strike + Net Debit) at expiration. Maximum profit is achieved if the underlying security is outside either of the outer strike prices at expiration. [Learn More] [Watch on YouTube].
