The short iron fly strategy is an advanced option trading strategy that combines option buying and option selling. This strategy needs to be used in an underlying that is low-volatility and be in a specific range within the expiry contract.

This strategy comes with limited profits and losses.

let’s understand How the short iron fly strategy works:

1.      In order to apply this strategy, you need to identify an asset that will be low volatile for a small period of time. You can select any index or stock that has option trading available.

2.      Selection of strike price is based on your range expectation of market, let me assume market Nifty CMP 18250 your expectation of market will be in a range of 300 point which is 18100 – 18400 then you will be selling an option 18100 PE and 18400 CE both are 3th OTM strike price and then you will be buying further far OTM strike price which might by 5th OTM or 7th OTM. Expiration date of the contract need to be same.

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