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Diagonal Iron Butterfly


An iron butterfly that involves selling a short-term strangle rather than a short-term straddle. In so doing, an investor can take advantage of short-term sideways movements in the underlying. The short-term strangle will generate lower premium but at the same time it allows a wider window for the underlying to move either way in the short term before the short options become in the money.

Therefore, this strategy is a form of long strangles.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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