Chapter 10 The Front Spread
The front spread shares many characteristics with butterflies and bull call spreads, except that they are set up as naked trades or with off-center strikes. Here at Option Pit, we love these trades for several reasons:
- They enable put or call selling at extremes without being completely naked
- They have a directional bias but are not extremely directional
- They collect premium
- They are short volatility
- They improve with time
There are a few things that make front spreads different from and, in my opinion, superior to butterflies and short call and put spreads. More often than not, when I look at trades at Option Pit, I end up with a broken wing butterfly or front spread. The trade is going to do well based ...