What is an Iron Butterfly?

The Iron Butterfly is available as a predefined strategy in the Firstock terminal. It combines a short straddle with protective wings, giving traders a defined risk and defined reward profile. It can be deployed in just a few clicks without manually entering all four legs.

🔹 Step-by-Step Deployment

1. Login to Firstock
   • Open the Firstock web or mobile app and log in with your credentials.
2. Open Option Chain / Strategy Watchlist
   • Navigate to the Strategy Watchlist or directly open the Option Chain for Nifty (or your chosen stock/index).
3. Select Predefined Strategy
   • From the predefined list, choose “Iron Butterfly (Short, Credit).”
4. Click on Build
   • For Nifty, the system automatically selects (short straddle + wings):
     • ATM Call → Sell (1 lot)
     • ATM Put → Sell (1 lot)
     • ATM + 200 Call → Buy (1 lot)
     • ATM – 200 Put → Buy (1 lot)
5. Save & Deploy
   • Review the strike prices, wing width, total credit, and margin requirements.
   • Click Save and Deploy to execute the strategy.

🔹 What You Get After Deployment

Once deployed, Firstock instantly provides:

• Payoff Chart (showing profit/loss at expiry)
• Option Greeks (Delta, Gamma, Theta, Vega)
• Breakeven Points (upper and lower)
• Probability of Profit (POP)

✅ Tip: The Iron Butterfly is a defined-risk, defined-reward credit strategy.

• Max profit (≈ net credit) occurs if the underlying expires exactly at the ATM strike.
• Max loss is capped at spread width – net credit.
• Wing width choice matters:
  • Wider wings → lower max profit, higher margin, but safer breakevens.
  • Narrower wings → higher max profit, but tighter range.