Butterfly Spread vs Iron Butterfly

A Long Call Butterfly and a credit Iron Butterfly can express the same expiration target using different option legs. The call butterfly opens for a debit; the iron version combines calls and puts and opens for a credit. That cashflow difference alone does not determine profitability.

What Are You Choosing Between?

With matched strikes, compare executable net prices, fees and the assignment treatment of each construction. The call version has three distinct option series and four contracts. The iron version has four series and four contracts, with both a short call and short put at the center.

The Main Differences

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Results for the example positions below, before costs
Compare	Call Butterfly	Iron Butterfly
Construction	Use equally spaced strikes with a 1:2:1 call ratio.	Sell the center call and put, with protective outer wings.
Example entry	$400 net debit	$600 net credit
Maximum profit	$600	$600
Maximum loss	$400	$400
Breakeven price	$94; $106	$94; $106

A Practical Example

Both use $90, $100 and $110. The call butterfly costs $400 and the Iron Butterfly collects $600 against $10 wings. Each has maximum profit of $600, maximum loss of $400, and breakevens at $94 and $106 under these zero-carry quotes. Their expiration curves overlap.

XYZ is at $100 when the option trades are entered. Premiums below are per share; each option contract covers 100 shares. Each column shows one complete position, not an equal-capital allocation. Prices are hypothetical and exclude commissions, taxes, dividends, financing costs and early-assignment cashflows.

Exact quantities, strikes, premiums and days to expiration
Position	Example legs
Call Butterfly	Buy 1 $90 call, 30 days, at $12.50 Sell 2 $100 calls, 30 days, at $5 Buy 1 $110 call, 30 days, at $1.50
Iron Butterfly	Buy 1 $90 put, 30 days, at $2.50 Sell 1 $100 put, 30 days, at $5 Sell 1 $100 call, 30 days, at $5 Buy 1 $110 call, 30 days, at $1.50

Comparing the Expiration Payoffs

Butterfly Spread vs Iron Butterfly — expiration payoff comparison — Profit or loss at the common 30-day expiration, including the stated entry amounts. Lines overlap when the example payoffs match. The displayed price window does not cap an unlimited loss or gain.

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Expiration profit / loss in dollars
XYZ price	Call Butterfly	Iron Butterfly
$80	−$400	−$400
$95	$100	$100
$100	$600	$600
$105	$100	$100
$120	−$400	−$400

What to Watch For

Identical expiration profit does not mean identical exercise events. The Iron Butterfly can involve assignment on either center option; the call butterfly has two short center calls. Compare settlement and near-strike expiration handling as well as the diagram.

Before expiration, time value and implied volatility can change a position’s market value. Short options also create exercise and assignment obligations. Review the full strategy guides for position management and settlement details.

Explore the Strategies

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