Iron Butterfly

What you must believe

NIFTY finishes very close to one strike (here 25,000). Not a range bet, a parking bet: double the condor's credit for a third of its room.

Construction

Sell the 25,000 straddle (CE ₹120 + PE ₹110), buy the 24,600 PE (₹40) and 25,400 CE (₹25) wings. Net credit ₹165 per unit: ₹10,725 per lot.

The numbers, before entry

• Max profit: ₹10,725, exactly at 25,000, decaying fast either side
• Max loss: ₹15,275, beyond either wing
• Breakevens: 24,835 and 25,165: a 330-point tent
• Margin: near the capped loss

Greeks profile

The shortest-gamma, longest-theta structure in the defined-risk family. The ATM shorts collect the chain's fattest premiums and feel every point of drift.

Realistic expectations

Almost never collects its full credit; the realistic play is a partial harvest while spot loiters near the strike. Needs stronger evidence of stillness than a condor: a pin candidate from the OI and gamma maps, not just a quiet chart.

Management rules

• Target a third to half of the credit, not the peak
• Exit when spot leaves the tent; the structure has no middle ground
• Best sized smaller than the equivalent condor, not larger

With other strategies

• The condor is the same architecture with breathing room: swapping between them is tuning credit against comfort for the same core view
• The calendar is the pin bet with the opposite vega: butterfly for high IV rank pins, calendar for low, same strike logic from the OI map
• Pin evidence comes from Lessons 26 and 27: the tallest positive gamma bar and the heaviest OI strike nominate the tent pole
• A broken wing rebuild removes the side you fear least: shift one wing out and the butterfly stops risking anything on the other side (next card)

Common mistakes

• Choosing it over a condor for the credit while ignoring the 330-point tent
• Holding for the full credit; the peak exists for one price at one moment
• Pinning bets without pin evidence: a quiet week is not a parked market