Ask The Institute

Your Education Snapshot:

Welcome to your source for answers to questions about option concepts, strategies, and terminology. A new question and answer is published each week. To view the Ask the Institute archives, click the "Ask the Institute Archive" link below.

Submit Question

Please note, questions WILL NOT be personally answered and may not be chosen for publication on the web site.

Ask the Institute Archive

View the archive of all "Ask the Institute" questions.

This week's question:

DATE: March 27, 2015

Can you explain the Iron Butterfly strategy?

The Iron Butterfly is considered an advanced level option strategy that has four option positions and three different strike prices. Anytime you see the word "iron" in the name of an option strategy, it means this particular strategy utilizes both calls and puts. An Iron Butterfly position is created by selling a straddle and buying a strangle where the strike prices of the strangle are equidistant above and below the strike price of the straddle. To learn more about the Iron Butterfly strategy, view this segment of "Ask the Institute".

  VIX Snapshot

*Third Party Advertisement