Iron butterfly (options strategy)

In finance an iron butterfly, also known as the ironfly, is the name of an advanced, neutral-outlook, options trading strategy that involves buying and holding four different options at three different strike prices. It is a limited-risk, limited-profit trading strategy that is structured for a larger probability of earning smaller limited profit when the underlying stock is perceived to have a low volatility.

${\displaystyle {\mbox{ironfly}}=\Delta ({\mbox{butterfly strike price}})\times (1+rt)-{\mbox{butterfly}}}$

It is known as an iron butterfly because it replicates the characteristics of a butterfly with a different combination of options (compare iron condor).^[1]