The video presents an example of an Iron Butterfly from the beginning to the fifth minute.
(1) QQQ is at $268.
(2) On August 14 you bet the price of QQQ will increase to $271.
(3) Sell a call at $271.
(4) Sell a put a $271.
(5) Buy a put at $270.
(6) Buy a call at $272.
While the Iron Butterfly is not the most exciting options strategies – it is less risky. The capped risk and limited gains over the life of the option are appealing to traders who do not enjoy significant uncertainty – or who are finding themselves whipsawed out of sideways trading markets.
For traders who enjoy trend trading and find themselves ‘on edge’ because their favorite traded stock is ranging, the Iron Butterfly provides an opportunity to make money those consolidation periods.