COVERED COMBINATION	IRON BUTTERFLY
About Strategy	Covered Combination Option Strategy This strategy involves selling OTM Call & Put Options and buying the underlying asset in either cash or futures market. It is also known as Covered Strangle as the profits are capped and risk is potentially unlimited. Risk: Un Read more..	Iron Butterfly Option Strategy  This strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. A trader will buy 1 OTM Put Option, sell 1 ATM Put Option, sell 1 ATM Call Option, buy 1 OTM Call Option. Due to offsetting of long and short positions, this strategy bags limited profit with limited risk. Read more..

COVERED COMBINATION Vs IRON BUTTERFLY - Details

	COVERED COMBINATION	IRON BUTTERFLY
Market View	Bullish	Neutral
Type (CE/PE)	CE (Call Option) + PE (Put Option)	CE (Call Option) + PE (Put Option)
Number Of Positions	2	4
Strategy Level	Advance	Advance
Reward Profile	Limited	Limited
Risk Profile	Unlimited	Limited
Breakeven Point	(Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2	Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received

COVERED COMBINATION Vs IRON BUTTERFLY - When & How to use ?

	COVERED COMBINATION	IRON BUTTERFLY
Market View	Bullish	Neutral
When to use?	This strategy is mainly suited for investors who are moderately bullish on a stock and are comfortable with increasing their position in the event of a price decline.	This strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements.
Action	Sell 1 OTM Call, Sell 1 OTM Put	Buy 1 OTM Put, Sell 1 ATM Put, Sell 1 ATM Call, Buy 1 OTM Call
Breakeven Point	(Purchase Price of Underlying + Strike Price of Short Put - Net Premium Received) / 2	Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received

COVERED COMBINATION Vs IRON BUTTERFLY - Risk & Reward

	COVERED COMBINATION	IRON BUTTERFLY
Maximum Profit Scenario	Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received - Commissions Paid	Net Premium Received - Commissions Paid
Maximum Loss Scenario	Purchase Price of Underlying + Strike Price of Short Put - (2 x Price of Underlying) - Max Profit + Commissions Paid	Strike Price of Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid
Risk	Unlimited	Limited
Reward	Limited	Limited

COVERED COMBINATION Vs IRON BUTTERFLY - Strategy Pros & Cons

	COVERED COMBINATION	IRON BUTTERFLY
Similar Strategies	Stock Repair Strategy	Long Put Butterfly, Neutral Calendar Spread
Disadvantage	Combinations can be profitable in sideways or rising markets. Greater combined net credit increases downside protection and potential return.	• Large commissions involved. • Probability of losses are higher.
Advantages	Limited Maximum Profit on the upside. Covered Combinations should only be traded on stocks that are bullish.	• Less amount of capital investment, steady income with low risk. • Traders can predict maximum loss and profit. • Versatile strategy, investors can transform position into bear call spread or bull put spread easily.