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This week's question:

DATE: March 27, 2015

QUESTION:
Can you explain the Iron Butterfly strategy?

ANSWER:
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".

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