Search results
Results from the WOW.Com Content Network
A long butterfly options strategy consists of the following options: Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows:
The iron butterfly is a neutral strategy and consists of a combination of a bull put credit spread and a bear call credit spread (see above). The iron butterfly is a special case of an iron condor (see above) where the strike price for the bull put credit spread and the bear call credit spread are the same. Ideally, the margin for the iron ...
Many options strategies are built around spreads and combinations of spreads. For example, a bull put spread is basically a bull spread that is also a credit spread while the iron butterfly can be broken down into a combination of a bull put spread and a bear call spread.
A long iron butterfly will attain maximum losses when the stock price falls at or below the lower strike price of the put or rises above or equal to the higher strike of the call purchased. The difference in strike price between the calls or puts subtracted by the premium received when entering the trade is the maximum loss accepted.
For example, buying a butterfly spread (long one X1 call, short two X2 calls, and long one X3 call) allows a trader to profit if the stock price on the expiration date is near the middle exercise price, X2, and does not expose the trader to a large loss.
A condor is also known as a "stretched butterfly", as its maximum profit is reached on a wider range of underlying prices compared to a butterfly. [6] Both butterflies and condors are known as "wingspreads". [1] The condor is so named because of its payoff diagram's perceived resemblance to a large bird such as a condor. [6]
To get into the position, the receiving partner lies down on their back, on a flat surface (think: a bed, table, etc.), with their butt in the air, and usually with their legs spread open and bent ...
In finance, a spread option is a type of option where the payoff is based on the difference in price between two underlying assets. For example, the two assets could be crude oil and heating oil; trading such an option might be of interest to oil refineries, whose profits are a function of the difference between these two prices.