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Fast Money

What's An Iron Butterfly?

New York Fashion Week is in full swing with beautiful people and lots of air kissing. What better time to rub shoulders with the fashionable and ask them about an elaborate trade called the iron butterfly.

As you might expect the famous and fabulous thought an iron butterfly was anything but a financial term.

Pete Najarian explains an “iron butterfly” is a trade that’s executed by options traders who believes a stock isn’t going to move, very much.

What's an Iron Butterfly?

It involves selling “the straddle” or the call and the put at the same strike price - and then buying “the wings” or the downside put and the upside call. He says effectively, you’re hoping for the stock to stay in a tight range.

What Is An Iron Butterfly?

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Trader disclosure: On Sept. 7, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (BJS), (BQI); Najarian Is Short (GS); Finerman Owns (GS); Finerman's Firm And Finerman Own (HD); Finerman's Firm Owns (AA), (KFT),(NTO), (WMT) Finerman's Firm Owns S&P 500 Puts ; Finerman's Firm Owns Russell 2000 Puts ; Finerman's Firm And Finerman Own (HD)