FT MarketWatch

Butterfly spread

An options strategy built on four trades at one Expiration date and three different strike prices. For Call options, one Option each at the High and Low strike price are bought, and two options at the middle strike price are sold. For Put options, the trades are reversed. This is a Limited risk, limited Return strategy that pays off when the price of the Underlier remains around the middle strike price. This strategy is essentially a Combination of a Bull and Bear spread.

Related Terms: 20 ACH, Bear, Bull, Call, Call option, Combination, Expiration date, High, Limited risk, Low, Option, Put, Put option, Return, Risk, Ratio, Rent, Spread, Trade, Underlier
Other Related Pages: Category: Trading Starting With: B
Additional Related Terms: 10-K, 52-week high, 52-week low, Allowance for depreciation, Asset/equity ratio, Average accounting return, ACH, Adjustable rate, Accrual of discount, Amortization of premium