An Iron Butterfly is a trade that is created by putting on a Short Straddle (selling at the money puts and calls) and a Long Straddle (buying out of the money puts and calls).
These types of trades limit the amount of money that you can make and it also limits the potential loss.
But the main reason why traders use this strategy is to be able to capture premium when the price of the underlying stock closes between the lower and upper strike prices.
You can also check out the Butterfly Spread
