Manual
Iron Butterfly
A defined-risk premium capture play for positive gamma pinning environments.
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 |
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.