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.
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
Butterfly with puts
The butterfly is a net debit ...