Iron Butterfly Calculator
Calculate max profit, max loss, breakeven points, and return on risk for an iron butterfly options strategy. Enter your ATM short strike, wing strikes, and credits to evaluate the trade.
Enter the ATM short strike and both wing strikes, plus the net credit from each side.
Enter your iron butterfly strikes and credits, then click Calculate Iron Butterfly to see max profit, max loss, breakevens, and return on risk.
For educational purposes only. Not financial advice. Read full disclaimer
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Iron Butterfly Formulas
Net Credit = Put Credit + Call Credit
Width = max(Short Strike - Long Put, Long Call - Short Strike)
Max Profit = Net Credit x 100 x Contracts
Max Loss = (Width - Net Credit) x 100 x Contracts
Breakeven Lower = Short Strike - Net Credit
Breakeven Upper = Short Strike + Net Credit
Return on Risk = (Max Profit / Max Loss) x 100
Worked Examples
Example 1: SPY Iron Butterfly
SPY is trading at $450. You sell the 450 put and 450 call (ATM), buy the 440 put and 460 call for protection. Put spread credit is $3.00, call spread credit is $2.50 (1 contract).
- Net Credit = 3.00 + 2.50 = $5.50 per share ($550 total)
- Width = max(450 - 440, 460 - 450) = $10
- Max Profit = 5.50 x 100 = $550
- Max Loss = (10 - 5.50) x 100 = $450
- Breakeven Lower = 450 - 5.50 = $444.50
- Breakeven Upper = 450 + 5.50 = $455.50
- Return on Risk = 550 / 450 x 100 = 122.2%
Example 2: QQQ Wide Wings
QQQ is at $380. You sell the 380 straddle, buy the 365 put and 395 call. Put credit is $5.00, call credit is $4.50 (2 contracts).
- Net Credit = 5.00 + 4.50 = $9.50 per share ($1,900 total)
- Width = max(380 - 365, 395 - 380) = $15
- Max Profit = 9.50 x 100 x 2 = $1,900
- Max Loss = (15 - 9.50) x 100 x 2 = $1,100
- Return on Risk = 1,900 / 1,100 x 100 = 172.7%
How to Use This Calculator
- Enter the long put strike — the lowest strike, providing downside protection.
- Enter the short (ATM) strike — the center strike where you sell both the put and the call.
- Enter the long call strike — the highest strike, providing upside protection.
- Enter the put spread credit — the per-share net credit collected on the put side.
- Enter the call spread credit — the per-share net credit collected on the call side.
- Click Calculate Iron Butterfly — review max profit, max loss, breakevens, and return on risk.
Frequently Asked Questions
- What is an iron butterfly?
- An iron butterfly is a neutral options strategy that sells an ATM put and an ATM call at the same strike while buying an OTM put below and an OTM call above for protection. It collects a larger credit than an iron condor because both short strikes are at-the-money, but the profit zone is narrower.
- How does an iron butterfly differ from an iron condor?
- In an iron condor the two short strikes are at different prices (one OTM put, one OTM call), creating a wider profit zone. An iron butterfly places both short strikes at the same ATM price, which collects more premium but requires the underlying to stay very close to that strike for full profit.
- When should I use an iron butterfly?
- Use an iron butterfly when you expect the underlying to stay pinned near a specific price through expiration, such as around a round number or a strong support/resistance level. It works best in high implied-volatility environments where the large credit offsets the narrow profit range.
- What is the maximum profit on an iron butterfly?
- Maximum profit equals the total net credit received, multiplied by 100 shares per contract. You achieve this only if the underlying closes exactly at the short strike at expiration, meaning all options except the short legs expire worthless.
- Can I close an iron butterfly before expiration?
- Yes. You can close all four legs at any time. Many traders close iron butterflies when they reach 50-75% of max profit to avoid gamma risk near expiration. Closing early also limits the chance of assignment on the short ATM options.