Reverse Iron Butterfly

Description

This Strategy involves simultaneously selling a call option and a put option at one strike price, buying a call option and a put option at a lower strike price, and selling a call option and a put option at an even lower strike price. All of the options have the same expiration date and are typically used in a neutral market outlook. The strategy is designed to profit from a narrow trading range in the underlying security.
The trader profits from the strategy if the price of the underlying security remains within a certain price range at expiration. If the price of the security is outside of this range, the trader will experience a loss.

Breakeven

Leg 2 plus the net debit
Leg 2 minus the net debit

Sweetspot

Stock price to be less than Leg 1 or more than Leg 4

Max profit

is limited and is equal to the difference between the prices at which the options were sold and bought.

Max loss

is limited to net debit entered for this strategy