Iron Butterfly
A four-leg strategy combining a short straddle with protective wings: sell ATM call and put, buy OTM call and put.
Explanation
The iron butterfly is a credit strategy that profits when the underlying stays near the short strike. It is similar to an iron condor but with the short strikes at the same price (ATM), resulting in a higher credit received but a narrower profit zone. Maximum profit is the net credit; maximum loss is the wing width minus the credit.
Example
With AAPL at $150: sell the 150 call and 150 put, buy the 155 call and 145 put for a net credit of $3.80. Max profit is $3.80 if AAPL closes at exactly $150.