Compare and Contrast: Iron Butterfly and Straddle

Video description: Please let me know IF you would like to see a Contrast and Compare series AND if you have any specific trades you would want to see Contrasted and Compared. Compare & Contrast: Short Iron Butterfly to Short Straddle around earnings in CSCO Short Straddle Link: https://optionstrat.com/bTzXyG65ZXqd Short Iron Butterfly Link: https://optionstrat.com/hxmiXIKinhop Here's a breakdown of the compare and contrast of the two options trades of a short iron butterfly and a short straddle: Short Iron Butterfly Involves selling an at-the-money (ATM) call option, selling an ATM put option, buying a higher strike call option, and buying a lower strike put option Max profit is achieved when the underlying asset's price is at the strike price of the ATM options at expiration Max loss is limited and occurs when the underlying asset's price is above the higher strike price or below the lower strike price at expiration Limited risk and limited reward trade Used when the trader expects the underlying asset to remain range-bound with low volatility Short Straddle Involves selling an ATM call option and selling an ATM put option Max profit is achieved when the underlying asset's price remains at the strike price of the options at expiration Max loss is unlimited and occurs when the underlying asset's price moves significantly above or below the strike price at expiration Unlimited risk and limited reward trade Used when the trader expects the underlying asset to have low volatility and stay within a range Compare Both trades involve selling call and put options Both trades are used when the trader expects the underlying asset to remain range-bound Both trades have limited potential profits Contrast The short iron butterfly involves buying additional options to limit risk and has a maximum loss that is limited The short straddle has no limit on potential losses