The Strategy. Iron Condor adjustments are just as important as entry and exit. If you let an iron condor run wild, it can hurt your portfolio and cause a max loss in the position. The most common reason is in the setup--the spread was not placed wide enough. To setup an iron butterfly, the options trader buys a lower strike out-of-the-money put, sells a middle strike at-the-money put, sells a middle strike at-the-money call and buys another higher strike out-of-the-money call.This results in a net credit to put on the trade. Specifically, the Iron Butterfly is a type of income strategy … This iron condor was set up in The Strategy Lab. Follow the "one-third rule" when trying to adjust. An Iron Fly is a defined-risk, At-The-Money Straddle. As a neutral strategy, the iron butterfly is designed to return a profit when the underlying security doesn't move much in price. Mike & Nick give you their take on this strategy’s management techniques, and why they … Related Trading ArticlesIron Condor Trade: Management 1 The RUT theta trade is managed by the risk profile. One of the best strategies for traders that don’t want to chase the market or guess which way the market moves next is an Iron Condor. They do require maintenance though. Iron Condors are perhaps the most popular options strategy in the book. Here is a new […] However, there a second reason: they failed because they did not collect enough credit. Managing an iron fly option trade that has gone wrong can be tough! At tastytrade, we generally use this strategy when we have a neutral assumption in a high Implied Volatility (IV) stock. Due to the Long Call and Put options, the Iron Fly requires much less buying power than a Straddle. Option income strategies focus on time decay and collecting premiums over the decay. But often traders get into trouble and lose money with them. When to Apply an Iron Butterfly Spread. Because it’s a combination of short spreads, an iron butterfly can be established for a net credit. It's a flexible strategy that you can adjust to increase the probability of returning a profit if you are prepared to risk higher potential losses. The Iron Butterfly options strategy, also known as the Ironfly, falls into a category of options strategies known as Option Income Strategies. Iron condors are great strategies because you get to trade a neutral strategy for a smaller margin. For example, I know a trader who profits from deploying a weekly iron butterfly strategy. Iron Condor Adjustments is a very important topic. This options trading strategy profits if the underlying stock remains within a specified range. Limited Profit. You can adjust the strategy if the price of the underlying asset moves out of your target range. The iron condor is known as a neutral strategy because the trader can profit when the underlying goes up, down or trades sideways. In my opinion, it would only make sense to adjust an iron condor, if the underlying’s price breaches either the upper or lower leg of an iron condor. You can think of this strategy as simultaneously running a short put spread and a short call spread with the spreads converging at strike B. First, it is important to understand when you even should consider adjusting an iron condor. As long as the RUT price stay between the … Continue reading Iron Fly Management | Trade Managers → However, the trader is … For instance, you can roll it down or up the way you’d roll a spread. Remember that your max loss should only be half your credit.