An iron butterfly that is typically established by selling a lower strike out-of-the-money put option, buying a middle strike at-the-money put option, buying a middle strike at-the-money call option, and selling another higher strike out-of-the-money call option, all on the same underlying. An investor putting on this trade will be poised to receive a net debit.

The maximum profit from a reverse iron butterfly can be attained when the underlying, by expiration date, falls below the short put strike price or rise above (or be at) the short call strike. Therefore, the maximum profit is limited to the difference in strike between the two calls (or the two puts) minus the net debit amount received to establish the position. As such, the upper breakeven point is equal to the long call strike plus the net debit amount, whereas the lower breakeven point is equal to the long put strike minus the net debit amount.

The breakeven range for a reverse iron butterfly is narrower than that for a reverse iron condor and a reverse iron albatross.The reverse iron butterfly allows investors to profit when the underlying makes a significant move in either direction.