Butterfly Spread

The butterfly strategy is one of the most robust and versatile option selling techniques available.
In a lazy, quiet market condition there is very little - if anything - to do to manage these positions - other than watch your 0 day risk graph line rise up as your account grows - then close it out [...]

Butterfly Spread Trades can be composed of all call options, all put options, or both call and put options.
Regardless of how they are constructed - for the most part they appear the same in a trading platform risk graph pay off diagram window - and also for the most part they perform the same while [...]

photo credit: BozDoz
The short strikes of the butterfly spread are usually sold ATM (at the money). Strikes that are at the money have the most ‘Time Premium’. Time premium is what will erode away making the butterfly spread trader / option seller money.
Butterfly spreads are 3 legged trades. Again, the short strikes are sold [...]