Zeta 101: Price-Independent Options Strategies

Hi ZetArmy, we’re here to bring you an article which teaches you how to make money in a CRAB market. When you want to make money, but you’re not sure if the price is going up or going down, this is the set of strategies for you.

Below are some strategies that will make money when the price isn’t moving (and conversely when the price is moving!), including straddles, strangles, and butterflies and iron condors.


Straddles are a representation of volatility. They are made up of a long call and long put of the same strike, and usually the at-the-money straddle is traded (it has the most exposure to volatility).

The payoff works like this — the more a product moves from the strike price, the more a straddle is worth at expiry!

Buy a straddle if you think that the product is going to move (and make money on the payoff), or sell a straddle if you think that the product is going to stay still (and collect the premium). It’s as simple as that.

Straddle Payoff Diagram


Think of strangles as a wider straddle. They are composed of a long call on a higher strike, and a long put on a lower strike. Strangles are often traded as a cheaper way to get volatility exposure as a straddle.

As evident from the payoff diagram, the move must be larger for strangles to pay off as much as straddles, but conversely cost less in premium. The principle is still the same – buy a strangle if you think that the product is going to move, and sell a strangle if the product is going to stay still!

Strangle Payoff Diagram


Butterflies are comprised of two spreads. A butterfly is a debit spread from a lower strike to a medium strike, and a credit spread from the middle strike to the higher strike. It can be comprised of put debit spreads or a call debit spreads (both of these have the same payoff!)

A butterfly’s max payoff occurs when the product finishes at exactly the middle strike, so buying a butterfly is betting that the product finishes in one place at expiry. If you sell a butterfly, you are betting for the product to finish outside of the lower or higher strikes.

Call Butterfly Payoff Diagram

Iron Condors

Iron condors are to butterflies, what strangles are to straddles. They are effectively a wider butterfly, which means that they cost less, but they also have a smaller maximum payoff.

They are composed of a debit spread from the lowest strike to a lower strike, and a credit spread from a higher strike to the highest strike (4 strikes!). Fundamentally it works the same way as a butterfly – buyers want the product to finish in the middle of the strikes, whilst sellers want it to finish outside of the lowest and highest bounds.

Iron Condor Payoff Diagram

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