How to use this calculator
- Enter the current share price and days to expiration.
- Set the body strike - the shared strike of the short call and short put.
- Set the lower wing (long put) and upper wing (long call), then the net credit you collect.
- Set the number of contracts - each multiplies the credit and risk by × 100.
- Read the result: max profit, max loss, both breakevens, profit zone, and return on risk.
What it tells you: whether an iron butterfly's credit is worth the narrow profit zone and capped risk - and exactly where the stock has to stay to keep it.
How this calculator works
An iron butterfly is four legs in one expiration: a short call and a short put at the same body strike (an at-the-money short straddle), wrapped in a long put below and a long call above as protective wings. Because you sell the straddle, the net credit is large — but you only keep all of it if the stock pins the body strike at expiration.
Enter the body, the two wings and the net credit and the calculator returns the full picture. Max profit is the credit times 100 per contract; max loss is the wider wing's width minus the credit, times 100, because at expiration the stock can only finish in one tail — only one wing can be breached. The two breakevens are the body strike plus and minus the credit, so the profit zone is exactly twice the credit wide. The payoff diagram shows the tent shape: a single peak at the body, sloping down to flat, capped losses on each wing.
Iron butterfly vs iron condor
They are the same idea with one knob turned. The iron condor sells two separate inner strikes, leaving a wide profit plateau between them; the butterfly collapses those two strikes onto a single body, trading the plateau for a much larger credit and a single profit peak. The butterfly pays more when the stock finishes near your strike, and loses faster when it drifts. Choose the butterfly when you have a strong view that the stock pins a level; choose the condor when you just expect it to stay in a range.
Worked example
A fixed, hypothetical illustration — not live market data.
A hypothetical stock trades at $100. With 30 days to expiration you sell the $100 straddle and buy the $90 put and $110 call as wings, for a $5.00 net credit. Both wings are $10 wide.
- Net credit / max profit: $5.00 × 100 = $500 per contract (only if the stock pins $100).
- Max loss: ($10 − $5.00) × 100 = $500 per contract.
- Lower breakeven: $100 − $5.00 = $95. Upper breakeven: $100 + $5.00 = $105.
- Profit zone: $95 to $105 — $10 wide, or 10% of the price.
- Return on risk: $500 ÷ $500 = 100% over 30 days.
Common mistakes
- Expecting to keep the full credit. Max profit needs the stock to pin the body exactly — realistically you close early for a fraction of it.
- Selling a butterfly when IV is low. The credit is the whole payoff; thin premium means a tiny profit zone for the same risk. Check the IV Rank first.
- Picking too narrow a body for a moving stock. The narrow profit zone is breached easily; match it to the expected move.
- Forgetting the four-leg commissions. Opening is four contracts and closing can be four more — material against a fixed credit.
- Assuming both wings can lose. They cannot at expiration — max loss is the wider wing minus the credit, not both.
Frequently asked questions
What is an iron butterfly?
An iron butterfly is a four-leg, market-neutral options trade: you sell an at-the-money call and put at the same body strike, and buy a further out-of-the-money put and call as protective wings. It collects a large net credit and profits most when the stock pins the body strike at expiration. It is the higher-credit, narrower cousin of the iron condor — a condor whose two short strikes have been collapsed onto one strike.
How are max profit and max loss calculated?
Max profit is the net credit × 100 per contract, kept only if the stock finishes exactly at the body strike. Max loss = (wider wing width − net credit) × 100: at expiration the stock can only be in one tail, so only one wing can be breached, and the loss is set by the wider wing minus the credit you collected.
What are the two breakevens?
Lower breakeven = body strike − net credit per share; upper breakeven = body strike + net credit per share. The position is profitable anywhere between those two prices and loses outside them, up to the capped max loss. The whole profit zone is just twice the net credit wide — much narrower than an iron condor.
Iron butterfly vs iron condor — what is the difference?
Both are defined-risk, market-neutral credit trades. The condor sells two different inner strikes, giving a wide profit plateau; the butterfly sells one shared body strike, giving a much larger credit but a single profit peak and a narrow zone. The butterfly pays more if the stock pins your strike, the condor is more forgiving if it drifts.
When does an iron butterfly make its maximum profit?
Only when the stock closes exactly at the body strike at expiration, so the short call and short put both expire worthless and the long wings expire unused — you keep the entire credit. Any move away from the body gives back profit, which is why the butterfly is a high-conviction, pin-the-strike trade.
Should the two wings be the same width?
They usually are (a balanced butterfly), which keeps the max loss the same on either side. You can run unequal wings, but then the max loss is set by the wider wing, since that side risks more. This calculator always uses the wider wing so the max loss it shows is the true worst case.
Iron butterfly vs short straddle?
A short straddle sells the same at-the-money call and put but with no wings — bigger credit, but undefined risk and heavy margin. The iron butterfly adds the long wings, capping the loss and slashing the capital required. You give up some credit for a loss you can actually survive — usually the right trade for a retail account.
When should I use an iron butterfly?
When you expect a stock to pin near a specific price and want a bigger credit than an iron condor gives - you sell the put and call at the same body strike and buy protective wings, collecting the most premium of these range trades in exchange for a narrower profit zone. It suits a high-IV, low-movement view with a precise target, ideally into an event you expect to fizzle. Skip it if you only have a rough range rather than a point, where the wider zone of an iron condor is the safer fit, and skip it when you expect a move - the tighter the zone, the faster a real move turns the position into a full loss.
Related tools and guides
Prefer a wider profit zone? Compare with the Iron Condor Calculator, or build any custom structure with the Payoff Diagram Builder.
Size the body to the move with the Expected Move Calculator, check premium with the IV Rank Calculator, and look up any term in the options glossary. Weighing it against the wider-zone cousin? See Iron Condor vs Iron Butterfly.
Educational tool only. Nothing here is financial advice. An iron butterfly is defined-risk but its narrow profit zone is breached easily, and early assignment or pin risk near the body can change the real-world outcome. Size positions accordingly.