Simulated data for display.
Illustrative narrative based on typical iron butterfly mechanics — not a verified live backtest. Build real backtests on the strategy builder.
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Iron Butterfly Backtest: 60 Cycles, More Credit, Less Room
ATM short straddles wrapped in protective wings. Win rate by wing width, the exit rule that fits a gamma-heavy structure, and how the iron fly trades roughly double the condor's credit for a much narrower profit zone.
The sample
Sixty cycles of
selling the body.
More credit than a condor, taken in exchange for a profit zone only two credits wide, and a drawdown that arrives fast when the stock leaves.
60Cycles, ATM 30-45 DTE
62%Win rate, 25% profit close
+$40Net per cycle, ~2x condor credit
-20%Max drawdown, 2022 vol expansion
On this page
The test setup
- Underlying
- SPY, entered when IV rank was above 40 (the structure needs rich ATM premium).
- Structure
- Iron butterfly — sell the ATM put and call (short straddle) at the body strike, buy symmetric protective wings the same distance above and below. Defined risk; maximum profit when the stock expires right at the short strikes.
- Entry
- 30–45 DTE, short strikes at the money, symmetric wings tested from tight to wide.
- Management tested
- Hold to expiration; close at 21 DTE; close at 25% of max profit; close at 25% + manage at 21 DTE.
- Period
- January 2020 – December 2024, sampled to 60 cycles.
The payoff math behind every cycle
- The structure
- Sell the put and the call at the body strike K_mid, buy the put at K_mid − W and the call at K_mid + W, for a net credit of C. Wings are symmetric, so a single width W defines both.
- Max profit
- C × 100, realised only if the stock finishes exactly at K_mid and every option expires worthless except the body, which you bought back for nothing.
- Max loss
- (W − C) × 100, realised anywhere at or beyond either wing. The wings are the only reason this number is finite.
- Breakevens
- K_mid ± C. The entire profit zone is two credits wide — that is the whole story of the iron fly in one line.
| Case | Wing W | Credit C | Max profit | Max loss | Breakevens |
|---|---|---|---|---|---|
| Narrow wings | 5.00 | 2.40 | +$240 | -$260 | K_mid ± 2.40 |
| Baseline ★ | 10.00 | 4.20 | +$420 | -$580 | K_mid ± 4.20 |
| Wide wings | 15.00 | 5.60 | +$560 | -$940 | K_mid ± 5.60 |
| Round-number check (K_mid = 100) | 5.00 | 3.50 | +$350 | -$150 | 96.50 and 103.50 |
Work the last row by hand to fix the formulas. Sell the 100 put and the 100 call, buy the 95 put and the 105 call, collect $3.50. Max profit is 3.50 × 100 = $350 at exactly 100. Max loss is (5.00 − 3.50) × 100 = $150 at or beyond 95 and 105. Breakevens are 100 − 3.50 = 96.50 and 100 + 3.50 = 103.50.
Two things fall straight out of the algebra. First, credit and max loss are complements — every extra dollar of credit is a dollar off the worst case, which is why the wing-width table below barely moves the win rate. Second, the 25% profit target is a target on C, not on the wing width: at the baseline it means buying the fly back for about $3.15 and banking roughly $105.
Win rate by wing width
| Wing width | Win rate | Avg credit | Max loss | Net / cycle |
|---|---|---|---|---|
| Narrow (½ exp. move) | 64% | $240 | -$260 | +$28 |
| ~1 expected move ★ | 62% | $420 | -$580 | +$40 |
| Wide (1.5× exp. move) | 61% | $560 | -$940 | +$36 |
Wing width is purely a risk-vs-credit dial — it barely moves the win rate, because the trade is decided by whether the stock pins the at-the-money short strikes. Roughly one expected-move width balanced credit against capped loss best.
Exit rules: take profit earlier than a condor
| Exit rule | Win rate | Net / cycle | Max drawdown |
|---|---|---|---|
| Hold to expiration | 48% | +$12 | -34% |
| Close at 21 DTE | 58% | +$30 | -24% |
| Close at 25% max | 62% | +$40 | -20% |
| 25% max + 21 DTE | 61% | +$42 | -16% |
Because the short strikes are at the money, the iron fly is gamma-heavy — an open profit can vanish in a single session. Taking profit at 25% of max (not the 50% used for condors) and managing at 21 DTE produced the best outcome in the illustrative test.
Iron butterfly vs iron condor
| Structure | Short strikes | Credit | Win rate | Profit zone |
|---|---|---|---|---|
| Iron butterfly | At the money | ~2× | 62% | Narrow |
| Iron condor | 16-20 delta OTM | 1× | 70% | Wide |
Same family, opposite trade-offs, and the payoff formulas explain why. Both structures cap loss at (W − C) × 100, but the iron fly puts its short strikes at the money, so C is roughly double — more credit, smaller worst case, and a profit zone only two credits wide. Pull the shorts out to 16–20 delta and you have a condor: the credit halves, the max loss grows, and the zone widens to cover most of a normal month. Across the illustrative 60 cycles that showed up as 62% winners for the fly against roughly 70% for the condor, with the fly earning more per winner and being tested far sooner. Choose the fly when you have a strong pin thesis and rich ATM premium; choose the condor when you just want range-bound theta with room for error. Full side-by-side: iron condor vs iron butterfly, or read the iron condor backtest.
Map the zone before you sell it. Body, wings, max profit, max loss and the break-even band.
Open the butterfly calculatorOne cycle, in full
Anatomy of the
worst cycle (2022).
An ATM SPY iron butterfly sold for $4.20 credit into mid-2022's elevated IV. A sustained leg lower pushed the stock more than an expected move below the short strikes within two weeks, and the gamma-heavy position swung to near max loss fast. Held to expiration it realized roughly -$560; the 25%-profit-and-21-DTE rule would have closed it for a far smaller loss had the move come later in the cycle.
The iron fly's narrow zone is unforgiving in a trending vol expansion. Wings cap the loss, but the at-the-money short strikes mean you are tested almost immediately when the stock moves.
Five takeaways
What the sixty cycles say,
stripped to five lines.
- Sell the ATM straddle, buy the wings. Roughly double a condor's credit for a much narrower profit zone.
- Only enter on high ATM premium. IV rank above 40, because the structure needs rich at-the-money premium to be worth the tight zone.
- Take profit at 25%, not 50%. The gamma-heavy ATM position can give an open profit back in a day. Bank it earlier than a condor.
- Size wings to ~1 expected move. Wing width is a risk dial, not a win-rate lever.
- Prefer the condor without a pin thesis. If you just want range-bound theta with room for error, the wider condor wins more often.
Keep reading
The rest of the
butterfly family.
Butterfly and iron fly guideSetup, credit and adjustments.
Iron condor backtestThe wider-zone cousin, on the same method.
Iron condor vs iron butterflyWide zone against double credit.
Butterfly calculatorBody, wings and the break-even band.
Backtest narrative is illustrative — built from typical iron butterfly mechanics and historical volatility regimes, not from live broker fills. Past performance, simulated or real, does not predict future results. See methodology.
Two credits wide.
Know the band first.
The Terminal prices the body and the wings on the live chain: the credit, the break-even band, the max loss and the gamma you are carrying into expiry. Run it on AAPL without an account.
Real market data, not a sandbox. See it live on AAPL.