Iron Butterfly#
The “Pin” Play - Aggressive premium capture when price is expected to stick to a magnet level.
Overview#
| Attribute | Value |
|---|---|
| Environment | Positive Gamma (Pinning) |
| Market Dynamic | Strong Magnet (Absolute Gamma Strike) |
| Volatility | High VIX (>15) |
| Primary Goal | Aggressive Pin - Capture max premium at the magnet |
| Profit Target | 25% of Max Credit |
| Max Loss | Width of Wings minus Credit Received |
Use when there’s a clear Absolute Gamma Strike acting as a magnet and VIX is elevated (premium is rich).
Structure#
- Sell ATM Call
- Sell ATM Put
- Buy OTM Call (20-25 points above ATM)
- Buy OTM Put (20-25 points below ATM)
Entry Criteria#
- Positive Gamma environment confirmed
- Clear Absolute Gamma Strike identified
- VIX > 15 (premium is worth selling)
- Center the fly at the Absolute Gamma Strike (even if spot is slightly off)
Exit Rules#
Profit Target#
- Close at 25% of max credit
Stop Loss#
- Price touches either Long Wing
- Premium expands to 1.5x Credit Received
Management#
Set and Forget. Do not touch or adjust once entered.
Do not chase or adjust this trade. The edge comes from the pin - if it’s not pinning, you’re wrong.