Credit spreads
Iron fly
A short straddle with a bought option on each side.
Index stays in a rangeOpens for a creditComfortable managing riskLoss capped
How it works
Sells the at-the-money call and put for maximum premium, then buys further-out options to bound the damage. It takes in far more than an iron condor and needs the index to finish far closer to the starting strike.
What it costs you when you are wrong
Capped, but you are wrong more often than with a condor because the profitable band is narrow. Most expiries land somewhere other than exactly at the money.
The position
- 1Sell the call at the money
- 2Sell the put at the money
- 3Buy the call 4 strikes out of the money
- 4Buy the put 4 strikes out of the money
- Enter
- 4 trading days before expiry
- Exit
- hold to expiry
- Legs
- 4
Test it yourself
This runs against real historical market data. Nothing is uploaded, nothing is stored, and the result is not a prediction — it is what this rule would have done, on that index, in that year, with the costs shown.