Glossary A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | 1 | 3 | 4 | 5 Definitions by InvestorWords.com   What is...? Iron Butterfly An iron butterfly is a four-legged options strategy composed of both calls and puts, with long options and short options at three different strike prices. The options in an iron butterfly must all be on the same underlying asset and the strikes must be equidistant. Both middle legs share the same expiration and strike price. This strategy has limited up and downside. There are two types of iron butterflies: Long Iron Butterfly – An example of a long iron butterfly would be: Long one $100 put, short one $105 put, short one $105 call, and long one $110 call. Generally used by traders who feel the underlying will move in a narrow range. Results in a net credit to the trader. Short Iron Butterfly – An example of a short iron butterfly would be: Short one $100 put, long one $105 put, long one $105 call, and short one $110 call. Generally used by traders who feel the underlying will move significantly. Results in a net debit to the trader. Copyright ©2009 by InvestorGuide.com. All Rights Reserved.