Condors & iron butterflies

Pinned near the strike

Credit

Risk: Defined both ways

Iron butterfly

Also called: Iron fly, Short straddle with wings

Sell an at-the-money straddle and buy an out-of-the-money call and put as wings: the short straddle's income with a capped loss.

Payoff sketch (per unit, index points)

At expiry

Today (7 days left)

Net premium

Credit 223 pts

Max profit

+223 pts (₹14,489 per lot)

Max loss

−77 pts (₹5,011 per lot)

Breakeven

24,777 / 25,223

Legs: Buy PE ATM −300 · Sell PE ATM · Sell CE ATM · Buy CE ATM +300. Illustration, not live prices: an index at 25,000, strikes 100 points apart, Black-Scholes premiums at 13% implied volatility, 7 days to expiry, 6.5% interest, no skew and before charges. Rupees per lot use a NIFTY lot of 65.

How it works

The credit is large because the sold options are at the money, but it is fully earned only if the underlying settles exactly at the middle strike.

The wings cap the loss at the wing width minus the credit.

When traders use it

A view that the price will stay close to its current level, with a defined worst case.

Greeks

Delta	Near zero at entry.
Gamma	Strongly negative near the middle strike.
Theta	Positive.
Vega	Negative.

Profit, loss and margin

Max profit	The net credit less charges, at the middle strike.
Max loss	(Wing width − net credit) × quantity, beyond either wing.
Breakeven	Middle strike ± net credit.
Margin	About the maximum loss once the wings are in.

In India

SPAN margins the whole position, so a defined-risk spread usually blocks far less than its short leg alone. Brokers grant the hedge benefit only when the protective leg is actually in the account, which is why the long leg is usually placed first.
STT is charged on the premium when an option is sold (0.15% of premium from 1 April 2026 in Arthfy's cost model). A short option left to expire, in or out of the money, is not charged STT again at settlement.
Since 20 November 2024 an extra 2% extreme-loss margin applies to short index options on their expiry day, so a position carried into expiry morning can need more margin than it did the day before.
Since 20 November 2024 each exchange keeps one weekly index expiry: NIFTY on NSE and SENSEX on BSE. Since September 2025 NSE contracts expire on Tuesdays and BSE contracts on Thursdays. BANKNIFTY, FINNIFTY, MIDCPNIFTY and stock options expire monthly (NSE on the last Tuesday). A holiday moves the expiry to the previous trading day.

Arthfy numbers

Iron butterfly: what it did since 2016

Iron butterfly, at the money, wing 4 strikes beyond, entered 8-15 days before expiry.

0-2 d

3-7 d

8-15 d

16-30 d

31-45 d

Try it in the F&O hub

Opens the tool with this structure on today's NIFTY chain. Reading is free with an Arthfy account; some runs use free attempts.

Open in the builderPayoff, Greeks, scenario grid and charges on today's NIFTY chain

Backtest since 2016Daily data, every NIFTY expiry

Replay on expiry daysMinute data since October 2024

Open the option chainLive premiums, IV and Greeks

Straddles & strangles

Short straddle