Crypto options glossary
What is a Bitcoin iron butterfly?
An iron butterfly sells an at-the-money call and put, a short straddle, and buys an out-of-the-money call and put as wings. It collects more premium than an iron condor, and pays the most if Bitcoin settles right at the middle strike. The wings cap the loss on both sides.
- A short straddle plus wings on both sides.
- The most it makes is at the middle strike, at expiry.
- Maximum loss: the wing width minus the credit.
- Breakevens: the middle strike ± the credit.
Credit
12.45 USDT
1,245 per BTC, all of it only at 84,000
Maximum loss
2.55 USDT
Breakevens 82,755 / 85,245
73,856today 83,92793,998
10 lots (0.01 BTC), at expiry, before fees. Bought legs at the ask, sold legs at the bid, from Delta Exchange.
Questions people ask
Iron butterfly or iron condor?
A butterfly collects more but needs Bitcoin to stay close to one price; a condor collects less and allows a wider range. Butterflies suit a strong view that the price will hold still; condors suit a range.
When do traders use an iron butterfly?
Often on expiry day, when they expect Bitcoin to settle near a strike with heavy open interest or near max pain.
How wide should the wings be?
Wider wings collect more credit and allow a bigger loss; narrower wings cap the loss tighter for less credit.
What is the maximum loss of an iron butterfly?
The width of a wing minus the credit received. With wings 3,000 away and a credit of 1,700 per Bitcoin, the most it can lose is 1,300 per Bitcoin, however far the price goes.
Is an iron butterfly the same as a butterfly spread?
They have the same payoff shape. A classic butterfly uses only calls or only puts and is paid for up front; an iron butterfly uses both calls and puts and takes in a credit. Traders selling premium usually mean the iron version.
When should I close an iron butterfly?
Many traders close once a set share of the credit is earned, or when the price reaches a breakeven, rather than holding to settlement. Deciding both levels before entry matters more than the exact numbers.
An iron butterfly, worked in numbers
An example with round numbers. Bitcoin is at 80,000 and all figures are for 10 lots, which is 0.01 BTC.
Sell the 80,000 call for 1,300 and the 80,000 put for 1,250: 2,550 in. Buy the 83,000 call for 450 and the 77,000 put for 400: 850 out. The credit is 1,700 per Bitcoin, 17 USDT.
The most it can make is that 17 USDT, and only if Bitcoin settles exactly at 80,000. The breakevens are 78,300 and 81,700. Beyond a wing the loss stops at the 3,000 wing width less the 1,700 credit: 1,300 per Bitcoin, 13 USDT. So the trade risks 13 to make up to 17, inside a range 3,400 wide.
Butterfly, condor or short straddle
Three range trades, from tightest to widest.
| Iron butterfly | Iron condor | Short straddle | |
|---|---|---|---|
| Strikes sold | At the money | Out of the money | At the money |
| Wings | Yes | Yes | No |
| Credit | High | Lower | Highest |
| Profit range | Narrow | Wide | Narrow |
| Worst case | Capped | Capped | No cap |
A butterfly is a short straddle that has bought a known worst case, and an iron condor moved in to the money.
How traders use iron butterflies
Mostly for a strong view that the price will sit still.
- On a quiet expiry day, centred on the strike the trader expects to hold, often near max pain or a heavy open-interest strike.
- Taking profit early. The full credit needs a settlement exactly at the middle strike, which almost never happens, so many traders close at a share of it.
- Choosing wing width by the loss they can accept: wider wings, more credit and a bigger worst case.
A pin trade with a floor
The iron butterfly is a bet that Bitcoin ends near one strike. Because the sold options are at the money, it collects the richest premium, and the wings turn the open-ended risk of a short straddle into a known worst case.
Butterflies and daily expiries
With a Bitcoin expiry every day at 5:30 pm India time, a butterfly can be opened on the morning of expiry around the strike traders expect to hold. Gamma is at its highest then, so a stop or a plan to close early matters.
Common mistakes with iron butterflies
The large credit is what misleads.
- Reading the credit as the likely profit. It is the best case, reached at one exact price.
- Holding into the last hour for the rest of the premium, when gamma at the middle strike is at its highest.
- Forgetting fees on four legs, in and out, which matter on a one-day trade.
- Opening it on a day with scheduled news. It is a quiet-day trade.
Written by the Algoclear team · Updated 22 September 2026 · Examples use Bitcoin options on Delta Exchange India.
See it on your own trades.
Every tool is free to explore. Build it, try it on paper, and let the engine run it when you are ready.
Start freeOptions trading carries risk, and you can lose money. Algoclear is a trading tool, not investment advice.