Regarding source of option information
“Iron butterfly is a safe way of profiting” it’s a way…safe is a very relative term the strategy itself is not inherently safe or overly risky…how it is done price timing etc many factors influence the safety factor…
Studying butterfly first makes the Iron Butterfly easier to understand… true we would say studying the strangle first…them learn iron butterfly
A butterfly has 3 vs an iron butterfly has 4 legs… This is completely inaccurate in traditional options there is only ever only 3 strikes being used and always 4 contracts … whether your
Combining
Call strike high
Call strike atm x 2
Call strike lower
Or put higher
Put 2 atm
Put lower
Or call strike higher
call atm put atm
Put lower
(Atm is general example does not have to be atm)
You could use any of the three above in all cases only 3 strikes are used
The difference between iron and non iron is is it a credit if within a range or a debit requiring a breakout of that rang
It could be call callx2 call : call callx1 putx1 put :put putx2
put…In all cases 4 contracts are needed…so commissions are the same regardless
The credit is a misleading term as its time is in your favor as against you but in all reality both will result in the initial net debit of you account …
Most options brokers will let you trade this its defined risk…This statement is very outdated that brokers will limit you and you have to be a veteran
Margin could be higher on either iron butterfly or butterfly risk is not inherently higher on a iron butterfly it all depends on strikes premium iv etc… so Statement more risk margin required is not a always Statement as stated
Profitable Range is wider on a iron butterfly than on a butterfly … Also inaccurate… again they all have 3 strikes…and butterfly could make more an iron butterfly could make more
Actually statement 3 and 4 conflict…to state higher margin and more profitable range does not go together … larger profit range means smaller risk and vice versa when being applied to butterflies and iron butterflies
Suggestion is delete the source that provided this info as it is wrong…
When you start spreading out strikes on traditional a options and get 4 strikes it will move into condor albatross on and on and on territory
[quote=options888]I watched the video “Iron Butterflies On Nadex Binaries For Range Bound Premium Collection” and there is nothing in it that talks about the difference between Butterflies vs Iron Butterflies when using Nadex.
Are they the same?
I’m confused since there is a difference when trading other options as in the definition below.
[COLOR="#FF0000"]
The Iron Butterfly Spread is a complex, advanced neutral option trading strategy built upon the foundation of a Butterfly Spread and is a high probability and safe way of profiting from a stock that is expected to stay stagnant or trade within a narrow price range.
Studying the Butterfly Spread first makes the Iron Butterfly Spread easier to understand.
Find Options Strategies With Similar Risk Profiles Find Options Strategies With Similar Risk Profiles
There are some important differences between the Butterfly Spread and the Iron Butterfly Spread though:
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A Butterfly Spread consists of putting on 3 option trades at once whereas the Iron Butterfly Spread consists of putting on 4 option trades at once in order to attain a higher potential profit than a basic Butterfly Spread. This also makes it more costly for traders with a small fund to put on an Iron Butterfly Spread due to the higher commissions involved in having an extra leg to the position.
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The Iron Butterfly Spread differs from the Butterfly Spread also in that the Iron Butterfly Spread results in a net credit whereas executing a Butterfly Spread results in a net debit. As a complex credit Spread strategy, most online option trading brokers will not allow beginner option traders to put on an Iron Butterfly Spread due to margin and trading level requirements. Only veteran traders with high trading levels and a fund big enough to fulfill margin requirements are allowed to put on Iron Butterfly Spreads. Traders need to check with own brokers as to the criteria needed to allow the trading of credit Spreads or Iron Butterfly Spreads.
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The Iron Butterfly Spread’s Profitable Range is also much wider than that of a Butterfly Spread on the same underlying asset at the same strike prices due to the unique combination of 4 option trades instead of just 3.[/color][/quote]