The Credit Iron Butterfly is a strategy that takes advantage of options implied volatility and the stocks expected price movement in either direction. You would use this strategy if you anticipate very little movement in the stock. For stock behavior, we compare how the stock typically moves over the expected hold period and what the strategy anticipates the stock to move according to the market prices. Let's take a look at the following opportunity filtered by marketchameleon scan for SPY trade ideas. Market Price: $4.03 Credit The market for this Credit Iron Butterfly is $4.03 bid and $4.09 ask with a midpoint of $4.06. Theoretical Value: $2.78 Based on historical stock behavior, the theoretical value of the spread is $2.78. This is the estimated value of the Credit Iron Butterfly when applying historical data to an option spread with similar conditions. Theoretical Win Rate: 72% The probability of profit is 72% using historical stock return data. In other words, when applying historical stock returns to a similar spread the current price of the spread would have been profitable 72% of the time at expiration. Theoretical Edge: 63% The theoretical edge is 63%. In theory, if you did this same option spread over and over historically at a credit of $4.03 and closed out on average at $2.78, your average expected return would have been 63% based on the amount at risk. NOTE: For the theoretical values and win rates, 6 years of historical stock return data was used in the analysis. Historical data does not guarantee any future results or outcomes. Historical data is only used as guidance. According to the current market, the Credit Iron Butterfly break even is -1.1% to the downside and +1.3% to the upside at expiration which is 2 trading days away. Any movement within this band would result in a profit at expiration and any movement more than this in either direction would result in a loss. Payout Diagram The Credit Iron Butterfly can have profits and losses that span across a different range of prices. A payout diagram can help you visualize the potential risks and rewards at expiration across a wide range of potential prices. The maximum gain at expiration will be realized if the stock price closes at 341.00. The strategy will earn the collected credit of $4.03. The breakeven points at expiration are at 336.97 and 345.03, which is -1.1% and 1.3% away from the spot price, respectively. The maximum loss at expiration will occur when the stock price is below 335.00 or above 347.00, and the strategy will then lose $1.97.Key Takeaway The Credit Iron Butterfly is a great strategy if you believe the stock will have very little movement by expiration. The strategy structure also limits risks. This Credit Iron Butterfly allows you to play an outlook that the stock will have little movement by September 18, 2020 expiration for a historical average expected return of 63% and a historical 72% probability of profit.