Iron Fly Option

 

Iron Fly

An Iron Fly is essentially an Iron Condor with call and put credit spreads that share the same short strike. This creates a very neutral position that profits from the passage of time and any decreases in implied volatility. An Iron Fly is synthetically the same as a long butterfly spread using the same strikes.

Directional Assumption: Neutral

Setup:
- Buy OTM Put option
- Sell Straddle (short call and short put at the same strike, typically At-The-Money)
- Buy OTM Call option

Ideal Implied Volatility Environment : High

Max Profit: Credit received

How to Calculate Breakeven(s):
- Upside: Short Call Strike + Credit Received
- Downside: Short Put Strike - Credit Received