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Options Made Easy: Your Guide to Profitable Trading, Third Edition by Guy Cohen

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Chapter 9. Two Basic Sideways Strategies

What if a stock has run out of steam and you anticipate a period of consolidation or lower volatility for a period of time? What if you have identified a range-bound stock and you want to take advantage of this price pattern behavior? You can achieve this by trading low-risk, high-reward options strategies! The two strategies discussed in this chapter are the butterfly and the condor, both of which produce—if the price remains within a certain price range, determined by the strike prices selected.

Butterflies

The butterfly involves the following steps (you can use all calls or all puts with the butterfly—you cannot mix the two):

Butterfly with calls

Or:

Butterfly with puts

The butterfly is a net debit ...

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