Iron Condor vs Iron Butterfly: Which Defined-Risk Credit Spread Fits Your Trade?

I trade option income by selling time and volatility. Both the iron condor and the iron butterfly are four-leg, defined-risk credit spreads. Both share the same core idea, collect premium up front, then let time and implied volatility do the work. In this guide, I compare iron condor vs iron butterfly with simple math, clear use cases, and practical rules I use in live markets.

I focus on what traders actually face, move size, volatility shifts, and risk control. I am writing for October 2025, so liquidity in SPY, QQQ, and AAPL is strong. This is education, not advice. Use the notes here to pick a method that fits your plan, account size, and comfort with risk.

Iron Condor vs Iron Butterfly at a Glance: Structure, Payoff, and Use Cases

Both trades sell premium, but the build changes credit and risk. Iron condors place short strikes outside the current price. Iron butterflies sell the at-the-money body, with protective wings. Condors pursue higher probability of profit with smaller credit. Butterflies accept a tighter profit zone, in exchange for larger credit.

Typical holding periods run 7 to 30 days. Both fit range or mean-reversion markets. Butterflies reward price pinning near the body. Condors like chop within a channel.

Feature	Iron Condor	Iron Butterfly
Short strikes	Out of the money, on both sides	At the money body, wings OTM
Net credit	Smaller	Larger
Profit range	Wider	Tighter
Probability of profit	Higher	Lower
Sensitivity to big moves	Moderate	Higher near the body
Best market fit	Choppy, range-bound	Small move, price pin near a level
Typical hold	1 to 4 weeks	Shorter, often 3 to 14 days

What I Mean by an Iron Condor

An iron condor sells an out-of-the-money call spread and an out-of-the-money put spread at the same time, for a net credit. The goal is simple, profit if price stays between the inner short strikes at expiration.

Example: stock at 100. Sell the 105 call and buy the 110 call. Sell the 95 put and buy the 90 put. Each side is 5 points wide.

Suppose the total credit is 1.50.

• Max profit equals the net credit, 1.50 per condor.

• Max loss equals width minus credit, 5.00 minus 1.50, so 3.50.

• Profit if price stays between 95 and 105 at expiration.

Pros: wider profit range, higher probability, smoother PnL day to day. Cons: smaller credit, more legs to fill, risk near the wings if a trend starts.

What I Mean by an Iron Butterfly

An iron butterfly sells the at-the-money call and put, the body, and buys wings on both sides for protection. The body sits closer to the current price, so credit is larger, but the profit zone is tighter.

Example: stock at 100. Sell the 100 call and the 100 put. Buy the 105 call and the 95 put. Wings are 5 points wide. Suppose the total credit is 3.20.

• Max profit equals the net credit, 3.20 per fly.

• Max loss equals width minus credit, 5.00 minus 3.20, so 1.80.

• Breakevens are 100 minus 3.20 and 100 plus 3.20, so 96.80 and 103.20.

Pros: larger credit, strong edge when price pins the body, faster theta near the body. Cons: lower probability, sharper gamma near expiration, more pin risk.

Similarities That Matter for Both

• Defined risk: losses capped by the wings.

• Net credit: premium collected up front.

• Theta positive: time decay helps.

• Short vega: falling implied volatility helps.

• Liquidity matters for tight fills and exits.

• Common windows are 30 to 60 days to expiration, managed early.

• Both face gap risk, assignment near expiration, and slippage in fast markets.

Key Differences That Change Results

• Strike placement: condor shorts sit outside price, butterfly body sits at price.

• Credit size: condor smaller, butterfly larger.

• Probability: condor higher, butterfly lower.

• Big moves: butterflies react more near the body, gamma is sharper.

• Management: condors spread risk across range, butterflies concentrate edge at the body.

When I expect a small move or a price magnet, butterflies can offer better reward to risk. When I expect noise inside a channel, condors fit better. Fill quality favors liquid tickers. Pin risk is a butterfly issue near expiration. Both benefit from a volatility crush, butterflies often more.

When I Choose Iron Condor vs Iron Butterfly

I keep a simple framework. I check IV rank, the options market expected move, and the recent realized range. I adjust strikes and size to match events like earnings, Fed days, or key data.

Range-Bound or Choppy: I Lean Iron Condor

Condors shine when price chops inside a channel. I prefer them when IV rank is fair to high and the market prices in noise, not trend.

• Short strikes just outside the expected move.

• In liquid ETFs, wings 2 to 5 points wide. Wider in high-priced stocks.

• Target credit of 25 to 40 percent of width, if liquidity allows.

Very Quiet or Pin Risk Works in My Favor: I Consider the Iron Butterfly

Butterflies fit when I expect a small move or a pin near a round level. I avoid major events unless I want a quick IV crush exit.

• Center the body at current price or a magnet level.

• Pick wings that set an acceptable max loss, often 1 to 2 times the credit.

• Plan to take profits at 25 to 50 percent of max profit to cut gamma risk.

Volatility, IV Rank, and the Expected Move Guide My Choice

I look at the 30 to 60 DTE chain. I read IV rank, the options market expected move, and compare to the recent range. 

If the expected move looks wide and uncertain, I reduce size or choose a wider condor. If IV is high and I expect a fast crush after an event, I may favor a butterfly for a quick take profit.

Keep rules simple and consistent. I do not guess. I measure and trade the plan.

My Strike and Width Rules of Thumb

• Condor shorts: near 15 to 25 delta.

• Wings: 1 to 3 times ATR for stocks, or fixed widths in ETFs.

• Butterfly body: at the money, wings set so max loss fits plan, often 1 to 2 times credit.

• Use limit orders, avoid illiquid weeklies, confirm open interest for each leg.

Risk, Math, and Management That Keep Me Safe

I keep the math clean and the plan tight. Defined risk helps, process keeps me in the game.

Max Profit, Max Loss, and Breakevens in Plain Math

For both structures, max profit equals the net credit. For a 5-point-wide spread with a 1.50 credit, max loss equals 5.00 minus 1.50, so 3.50 per spread.

• Condor breakevens: short put strike minus credit, and short call strike plus credit.

• Butterfly breakevens: body minus credit, and body plus credit.

Condor example: shorts at 95 and 105, credit 1.50. Breakevens are 93.50 and 106.50. Butterfly example: body 100, credit 3.20. Breakevens are 96.80 and 103.20.

Greeks That Matter: Theta, Vega, and Gamma

Both are theta positive, so time decay helps. Both are short vega, so falling IV helps. Gamma rises near expiration. It is strongest in butterflies near the body. 

A fast move into or away from the body can swing PnL hard. I close early when targets hit, or when gamma risk rises into single-digit DTE.

How I Enter, Exit, and Adjust

• Enter in liquid names during normal hours. Use limit orders.

• Avoid opening or adjusting during major data releases.

• Exit at 25 to 50 percent of max profit, or at a time stop, such as 21 DTE.

• Cut losers when price breaks an inner short strike and IV rises.

• Adjustments: roll the threatened side out or up or down, shift the untested side closer to add credit, or turn a condor into an unbalanced iron fly if it improves risk.

Capital, Margin, and Taxes I Watch

Defined risk keeps margin near width minus credit, per spread. Portfolio margin can reduce displayed risk, but gaps still hurt. In the US, gains on short options are generally short term. More legs can increase fees and slippage. I prefer small size, many names, and consistent rules to smooth returns.

Realistic Examples and a Quick Checklist

Example Trade: SPY Iron Condor Walk-Through

Assume SPY at 450 with 45 DTE. IV rank is 35. The options market prices an expected move of about 12 points.

• I sell the 436 put and the 464 call. I buy the 431 put and the 469 call. Each side is 5 points wide.

• Net credit: about 1.60, depending on fills.

• Max profit: 1.60 per condor. Max loss: 3.40.

• Breakevens: 436 minus 1.60, and 464 plus 1.60. That is 434.40 and 465.60.

Why these strikes: shorts sit just outside the expected move. Width at 5 points matches SPY liquidity and fits my risk. Planned exit: take profits at 50 percent of max profit, or close at 21 DTE. If SPY tags 436 or 464 and IV jumps, I reduce risk or exit.

Example Trade: AAPL Iron Butterfly Walk-Through

Assume AAPL at 180 with 40 DTE. IV rank is 28. The expected move is about 8 points.

• I sell the 180 call and the 180 put. I buy the 185 call and the 175 put. Wings are 5 points wide.

• Net credit: about 3.10.

• Max profit: 3.10 per fly. Max loss: 1.90.

• Breakevens: 176.90 and 183.10.

Plan: I take profits around 30 to 50 percent fast, since theta is strong near the body. I cut loss if AAPL trades beyond a breakeven on rising IV. If price drifts toward 180 into a calm week, I may exit even earlier to avoid gamma into the last two weeks.

My Pre-Trade and Post-Trade Checklist

• Before entry: IV rank and expected move, recent range, and event calendar.

• Confirm liquidity, tight spreads, and strong open interest on each leg.

• Choose strikes by delta or key levels. Size small per account rules.

• Use limit orders. Avoid illiquid weeklies unless spreads are tight.

• Set exit targets and time stops. Know your adjustment plan.

• Log the trade, thesis, and risk.

• After exit: note what worked, what failed, and how IV changed.

• Check slippage costs and fill quality.

• Ask if iron condor vs iron butterfly matched the setup.

• Update rules with one small improvement, not a full rewrite.

Conclusion

The choice is simple to state, condor for wider ranges and higher probability, butterfly for larger credit when I expect a small move. Rules, position size, and early exits protect capital. Start small, track results, and refine your process with each cycle. On your next setup, compare iron condor vs iron butterfly using the checklist, then pick the one that matches your read.