Condors and flies are ranges made of verticals
A single vertical fences risk on one side of the market. Put two opposing verticals together — one above the current price, one below — and you fence both sides. The result is a structure whose payoff is a tent: profit inside a central band, defined and capped loss outside it.
The iron condor and the iron butterfly are the two canonical versions, and they differ only in how wide the top of the tent is.
- An iron condor keeps its two inner strikes apart. Between them sits a flat plateau — a whole range of prices where the position is at its best. The tent has a broad, flat roof.
- An iron butterfly pushes the two inner strikes together onto a single strike. The plateau collapses to a peak: the position is at its best only if price finishes right at that point, and value falls away on either side.
(The iron in both names means built from a put vertical plus a call vertical, taken in for a credit. A plain butterfly builds the same peaked payoff from calls alone or puts alone; the geometry below is the iron version.)
In both, the outer strikes are the edges of the tent. Past an outer strike, the two verticals on that side are fully offset, so the loss stops moving — it is capped at a number you knew at entry. The structure says something about where price will stay, not which way it will move; a condor states that as a wide band, a fly as a single point.
A worked example
Take a generic instrument — call it GENCO — trading near 100.
Build an iron condor: below the market, sell the 95 put and buy the 90 put (a put vertical); above it, sell the 105 call and buy the 110 call (a call vertical). The two credits combine. The tent now runs from 95 to 105: finish anywhere in that band and both short strikes expire out of the money, so the position keeps its credit. Outside 90 or 110, each side's long strike caps the loss — the edges of the tent, fixed at entry.
Now collapse it to an iron butterfly: move both inner strikes to 100. The 95-to-105 plateau shrinks to a single peak at 100. The structure is the same idea — opposing verticals fencing a range — but the profitable zone is now a point instead of a band, in exchange for a larger payoff at that point.
This is geometry, not guidance: the strikes you choose set where the tent's roof and edges sit, and those levels are readable the moment the structure is built.
See it in kestrel
Read how a range structure behaves off a real, recorded range-bound session:
npx kestrel.markets sim mean-reversion-range-fadeThat runs a deterministic simulation over a generic range-bound session — managed licensed data, no wall time, no signup, no card — and prints a certified proof URL. Recompute the whole record on your own machine, byte for byte:
npx kestrel.markets certify https://kestrel.markets/proof/art_f576347572a410a52647cf90Keep the tool one command away: drop the kestrel.markets MCP server into your client and the next session you want to read is already wired up — no account in between.