Anyone reminds of a good topic, here in ET, with a deep discussion about flies (debit) vs iron flies (credit) ? I just know the simplistic approach "go for flies when IV is low and iron flies wen IV is high".
A butterfly is a bearish spread and a bullish spread (of the same width) that share a (middle) strike. As the $5-wide 2795/2800 and 2800/2805. A call butterfly is all calls. A put butterfly is all puts. An iron butterfly is puts on bottom, calls on top. That's it. End of story. Are they any good? They are only a trade pattern -- they are not a "thing." That pattern are a tool -- appropriate in some situations, maybe not-so-appropriate in others. You can buy them, sell them, buy to initiate, buy to *move*..... All kinds of uses. From the profit diagrams available from any search engine via the keywords Options Butterfly Graph Images, you can see that they have greater peak profit than condors of the same neighborhood, but a narrower payout range. Use the right tool for the right situation. "It is a poor carpenter who blames his tools." Don't be a poor carpenter.
This is incorrect right here. Flies and Iron Flies are synthetic equivalents; the only difference is that flies are entered into for a debit and can expand up to max profit while iron flies are entered into for a credit and could potentially expire worthless (short options ATM) giving you max profit. They are BOTH better strategies to initiate in high IV environments since both of them are short guts (the middle) and long wings The considerations to choose one over the other are more related to non-transparent factors such as dividends, interest rates, commissions, etc but they are synthetically equivalent