A Butterfly Spread Option is a neutral strategy with limited risk. Also known as a Butterfly Option Spread it involves a combination of bull and bear spreads. Four option contracts with same expiry date at three strike points are combined by the holder. It creates a perfect price range and profit for the holder. A
Bull Spread refers to a strategy in options trading where profits are maximised if the price of the underlying security goes up. The Spread is created by both puts and calls at various strike prices. The option is purchased at a lower strike price and is sold at a higher strike price. Usually, the call
Bear Put Spread is an options strategy employed by traders to buy and sell Put options with same expiry date but different strike prices. The spread is attained when one buys put options at a particular strike price and sells an equal number of puts at a lower one. Thus, the profit is measured by