The Best 10 Option Trading Strategies

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9. Butterfly spread

The butterfly spread strategy is quite similar to the condor strategy. It also has four combinations that are long at the money call and put butterfly spread and short at the money call and put butterfly spread. Long at the money call and put butterfly spread are for the stationary market and short at the money call and put butterfly spread volatile markets. Steps that involve long at the money call butterfly spread are buying in the money and out of the money call option and following selling at the money call option. At the money, option means the strike price of this option is quite close to the current market security price.

several contracts at the money call option must double the number of contracts of in and out of the money option. Profit can be generated as long as the security price does not move out from the upside and downside breakeven range. The upside breakeven level is calculated by adding this position to the highest strike price. The downside breakeven level is calculated by subtracting the lowest strike price to payout out of this position.
The short at the money call butterfly spread is established by selling in and out of the money call option and following by buying at the money call option. several offers of contracts at the money option must be double the number of contracts of in and out of the money option. As long as the security price has moved the heathen side breakeven range, profit can be generated. This strategy generates limited profit and also causes limited loss if the security price does not go in the right direction.

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