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A short iron butterfly option strategy will attain maximum profit when the price of the underlying asset at expiration is equal to the strike price at which the call and put options are sold. The trader will then receive the net credit of entering the trade when the options all expire worthless.
A condor is a limited-risk, non-directional options trading strategy consisting of four options at four different strike prices. [ 1 ] [ 2 ] The buyer of a condor earns a profit if the underlying is between or near the inner two strikes at expiry, but has a limited loss if the underlying is near or outside the outer two strikes at expiry. [ 2 ]
Iron butterfly - sell two overlapping credit vertical spreads but one of the verticals is on the call side and one is on the put side. The short strikes are the same. In terms of CVAR (conditional value at risk), Butterfly is a useful strategy for 0DTEs (same day expiration contracts) because CVAR is low compared to many other strategies.
A short butterfly position will make profit if the future volatility is higher than the implied volatility. A short butterfly options strategy consists of the same options as a long butterfly. However now the middle strike option position is a long position and the upper and lower strike option positions are short.
The iron condor is an options trading strategy utilizing two vertical spreads – a put spread and a call spread with the same expiration and four different strikes. A long iron condor is essentially selling both sides of the underlying instrument by simultaneously shorting the same number of calls and puts, then covering each position with the purchase of further out of the money call(s) and ...
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A common strategy among professional option traders is to sell large quantities of in-the-money calls just prior to an ex-dividend date. Quite often, non-professional option traders may not understand the benefit of exercising a call option early, [ citation needed ] and therefore may unintentionally forgo the value of the dividend.
Simple payoff diagrams of the four types of ladder. In finance, a ladder, also known as a Christmas tree, is a combination of three options of the same type (all calls or all puts) at three different strike prices. [1]