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Butterfly Spread

Check out our butterfly spread posts on the blog!

 

Here is a snippet of what the blog post contains:

A butterfly spread is simply the combination of a long and short spread of the same option type.

In a long butterfly spread, the long and short spread share the same short strike option. Max profit is received if the stock price is at the short strikes at expiration.

In a short butterfly spread, the long and short spread share the same long strike option. Max profit is received if the stock is outside either of the short options at expiration.

A broken wing butterfly spread is a long butterfly spread that is traded for a credit. One of the wings is adjusted to obtain a larger credit, and eliminate risk to one side.

Long Butterfly Spread

 

Short Butterfly Spread

 

Broken Wing Butterfly Spread

 

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