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OptionsMath

Long Iron Butterfly Calculator

Long iron butterfly profit equals long straddle value minus short wing obligations minus net debit.

Expiration scenarios

Solution

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Educational estimate only, not financial advice. Results exclude commissions, taxes, slippage, dividends, assignment risk, margin, and broker-specific rules. Verify before trading options.

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Long Iron Butterfly Formula

A long iron butterfly buys the body straddle and sells outside wings, creating a defined-risk long-volatility payoff.

Worked Examples

Load these examples to compare common long iron butterfly payoff outcomes.

LONG IRON FLY

Model a reverse iron butterfly

The stock moves beyond the upper wing and the trade reaches tail profit.

  • Enter the manual prices and assumptions.
  • Review the calculated risk, reward, and break-even metrics.
  • Compare the chart with the highlighted scenario.

Result: the calculator updates the scenario metrics and chart from those inputs.

Real fills, fees, and broker margin rules are not modeled.

How It Works

A long iron butterfly, also called a reverse iron butterfly, buys the body straddle and sells outside wings.

Example Problem

Sell the lower put, buy the body put and call, and sell the upper call.

  1. Calculate the net debit.
  2. Compare debit with wing width.
  3. Find lower and upper break-evens.
  4. Evaluate expiration payoff.

The strategy needs a move outside the break-evens to overcome the debit.

Key Concepts

Long iron butterflies are defined-risk long-volatility trades with capped tail profit.

Applications

  • Trading expected large moves.
  • Comparing long straddles with wing protection.
  • Planning defined-risk event trades.

Common Mistakes

  • Confusing it with the short iron butterfly.
  • Ignoring debit relative to wing width.
  • Using unequal wings for a classic iron fly.

Frequently Asked Questions

What does the Long Iron Butterfly Calculator calculate?

It calculates the selected options result from manual inputs, without requiring live stock or option quotes.

Does this calculator need live market data?

No. Enter the prices, premiums, volatility, days, or Greeks yourself. The calculator uses those manual inputs only.

Are commissions, taxes, margin interest, and assignment fees included?

No. The result excludes commissions, fees, taxes, borrow costs, slippage, and broker-specific margin rules.

Why can real trading results differ?

Real option prices can change with implied volatility, liquidity, dividends, early assignment, and execution prices.

Reference: Standard options payoff, probability, and risk-management formulas.

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