23. Butterfly Spreads
The standard butterfly spread trade is typically a cheap trade with low risk and lots of leverage. The drawback of the standard butterfly trade is that it focuses on a narrow range of profitability. The trade can be arranged to have a wider profit range, but then it becomes considerably more expensive.
These spreads can be used in various ways. The most common strategy utilizes a butterfly trade to target a strike price toward which a stock or ETF is trending. They can also be traded with adjustments; although, this usually adds additional risk to the trade.
There are modified versions of the standard butterfly trade that frequently can be established for a credit or at least a break-even net cost. These modified butterfly ...
Get Learn How to Trade Options (Collection) now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
