Reverse iron butterfly calculator buy the straddle, sell the tails
A reverse iron butterfly buys the at-the-money straddle and sells a wing on each side to pay for part of it. It costs a debit, it loses that debit if the underlying finishes exactly where it started, and it pays when the move is large enough to clear the wings. It is an iron butterfly with every side reversed.
Outlook: Volatile — anywhere but here
Max profit
—
best case at expiry
Max loss
—
worst case at expiry
Breakeven
—
where the trade turns even
Net debit / credit
—
to open the position
Your reverse iron butterfly
Per-share premiums. One contract = 100 shares.
100 shares per contract
Profit at expiryLoss at expiryBreakevenStrikes & spot
How a reverse iron butterfly pays
Net debit = (long put + long call) − (short put + short call)
Max profit = (wing width − net debit) × 100 × contracts (at or beyond either short strike)
Max loss = net debit × 100 × contracts (at the long strike exactly)
Lower breakeven = long strike − net debit
Upper breakeven = long strike + net debit
The worst case is the strike you bought. Finish exactly there and both longs expire worthless while both shorts do too — you lose the whole debit.
Selling the wings is what makes it affordable. A bare straddle costs more; the wings pay for part of it and cap the payoff in exchange.
It needs a bigger move than it looks. The breakevens sit one full debit either side of the strike, and the debit here is large because both longs are at the money.
Worth naming. The at-the-money straddle is the most expensive part of the chain, so this structure pays a lot to be right and loses all of it to a quiet week. Selling the wings helps, but it also caps the reward at roughly what you risked — a near one-to-one bet that needs to be right more than half the time to pay, which is the opposite of what most option buyers assume they are getting.
What this does not model
Every figure here is the payoff at expiry. Before then your position is marked at market prices that still carry time value, so a trade can show a loss while sitting exactly where you wanted it — falling implied volatility alone will do that.
Short legs carry assignment risk. American-style options can be exercised at any time, most commonly on in-the-money calls just before an ex-dividend date. The diagram assumes you hold every leg to expiry.
For the live version — real Greeks, current marks and what-if scenarios against actual
chain data — that is what the GreeksView desk does, in your
browser, on your own broker keys.
Frequently asked questions
What is a reverse iron butterfly?
A long at-the-money straddle with a wing sold on each side. You buy the put and the call at the same strike and sell a further-out put and call to reduce the cost. It profits when the underlying moves away from the strike in either direction.
How do I calculate the max loss on a reverse iron butterfly?
It is the net debit you paid, suffered when the underlying finishes exactly at the long strike. Buy the 100 straddle for $7.80 and sell the 90 put and 110 call for $2.80 and the debit is $5.00 — $500 per contract, which is the most you can lose.
What is the maximum profit?
The wing width minus the net debit. A $10 wing with a $5.00 debit pays $5.00, or $500 per contract, once the underlying reaches $90 or $110. Note that this is the same as the maximum loss — the structure risks roughly one to one.
Where are the breakevens?
One net debit either side of the long strike. Long the 100 straddle for a $5.00 net debit puts breakevens at $95.00 and $105.00: the underlying must move at least 5% before the position makes anything.
Reverse iron butterfly or reverse iron condor?
The butterfly buys both options at the same strike, so it costs more, risks more, and needs a bigger move — but pays sooner once that move happens. The condor separates the longs, costs less, and has a dead zone between them where the whole debit is lost. Neither is safer; they price the same view differently.
Are commissions included in these numbers?
No — every figure is gross. On multi-leg positions this matters more than people expect: four legs to open and four to close is eight commissions against what may be a couple of hundred dollars of credit. Check your broker's per-contract rate against the max profit shown here before deciding a trade is worth putting on.
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Educational tool only — not investment advice, and not a recommendation to enter any
position. Options involve substantial risk and are not suitable for every investor.
Figures are theoretical, exclude commissions and taxes, and assume the position is
held to expiry. GreeksView is not a broker and does not hold funds.