Butterfly (options)

A Butterfly ( also: butterfly spread ) is an option strategy in which one (ie, derivative financial instruments) to changing or constant prices of the underlying speculating with options.

The operation is very similar to a short straddle, but you can mitigate the risk of loss with a butterfly.

To construct a butterfly, you can buy, for example, two call options at two different strike prices, continues to sell you two call options at an exercise price, which is located between the two purchased calls. The exercise date is the same for all options. For this example, there is standing next payout chart.

To construct a butterfly, with which one can speculate strongly to changing prices, to sell, for example, two call options at different strike prices and buys the calls to the mean price.

• Option trading