Iron Fly Options Strategy gave 6% return (in one week)

Discussion in 'Must-Read Interviews, Articles & News Items' started by Arjun, Jul 8, 2021.

  1. Arjun

    Arjun Chief Executive Officer (CEO) Staff Member

    Mar 19, 2015
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    Nithin Kamath, the visionary Billionaire founder of Zerodha, rightly advised us a few days ago that trading options strategies can increase the odds of winning.

    To test the veracity of the advice, an intrepid investor-trader implemented the "Iron Butterfly" Options Strategy.

    The mechanics of how the strategy should be implemented have been explained in detail by Seth Freudberg, an authority on the subject.


    As one can see from the image, the strategy involves selling an ATM Straddle (15800CE and PE) and buying OTM Calls (16000CE) and Puts (15600PE) as protection.

    The strategy has a wide break even from 15673 to 15927.

    If the Nifty expires anywhere between the two extremes, there is a positive pay-off.

    The maximum gain of a whopping 14.29% is attained if the Nifty expires at the Straddle point of 15800.

    In the present case, the Nifty settled at 15728 on expiry, which yielded a return of 6.21% on the capital deployed by way of margin money.

    Experienced traders are able to eke out more gains by making periodic adjustments to the trade.