MRK Iron Butterfly — Nov 20, 2026
Trade Setup
Current Stock Price
$764.50
Entry Price
$764.50
Target Price
$382.25
Stop Loss
$1529.00
Expiration
Nov 20, 2026
Suggested Contracts
1
Strike Details
Sell 145P / Buy 135P / Sell 145C / Buy 155C
Risk / Reward
Max Loss
$235.50
Max Profit
$764.50
Analysis
MRK (Merck & Company, Inc. Common Stock (new)) presents a iron butterfly opportunity with very elevated implied volatility. IV Rank 81. IV 3727.0% trades 1706.0pp above 30-day HV (2021.0%). This setup favors net premium sellers.
Sell the $145 ATM put and the $145 ATM call simultaneously (both at the same strike near the underlying), with long wings further out for defined risk. Higher max profit than a condor but a tighter profit window — ideal when you expect a stalling move into expiration. Underlying ~$144.30, 46 DTE. Max profit $765 per contract, max loss $236, 324.6% return on risk, 24% POP. Breakevens at $137.35 and $152.65.
Management: take profit at ~50% of max profit ($382). Cut at 2x credit ($1529 loss). If short strike is breached with > 14 DTE, consider rolling out for a credit. Close before expiration week to avoid gamma risk.
Setup Instructions
Underlying: MRK @ ~$144.30 Expiration: Nov 20, 2026 (46 DTE) Net credit (entry): ~$764.50 per spread Legs:
- Sell MRK Nov 20, 2026 $145 Put (delta -0.59, mid $8.85)
- Buy MRK Nov 20, 2026 $135 Put (delta -0.35, mid $4.05)
- Sell MRK Nov 20, 2026 $145 Call (delta 0.42, mid $4.92)
- Buy MRK Nov 20, 2026 $155 Call (delta 0.22, mid $2.08)
Use limit orders at the mid or slightly worse. Verify bid-ask spread (currently ~3.2% of mid) before sending.
Management Plan
Take profit at 50% of max profit ($382). Cut loss if position reaches 2x credit received ($1529 loss). Roll if tested with > 14 DTE remaining.