Compositedge E-learning- Butterfly spreads
Butterfly spread strategies are a combination of a bull and bear spread, effectively making it a low-cost neutral strategy. The strategy typically comprises of a combination of three strike prices using a combination of either calls or puts having the same expiry with limited risk and profit potential. Butterfly spreads are categorized into two types
Long butterfly- Generally used if you’re anticipating prices of the underlying to remain in a narrow range until the expiry of the contract.
