Definition

The sale of a call and put spread where neither spread shares the same strike. Typically (but not always) the call spread will be OTM as will the put spread.

Purpose

To prevent losses that would occur on a directional market had one elected to do an iron butterfly instead. It is not as sexy to the naive trader, as a smaller profit may be received than had he done an iron condor, but like the Broken Wing Butterfly spread, the risk averse properties of the trade more than make up for a slightly smaller ‘potential’ profit. This strategy is ideal at support and/or resistance levels.