Butterfly Spread

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When you look at a risk graph of the butterfly spread, you can see that the butterfly payoff is tremendous - especially when compared to other option income spread strategies such as the [...]

Our April ‘10 Butterfly Spread is off and running…

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Technorati Tags: Butterfly Option, Butterfly Spread, Credit Spread, Iron Condor

Butterfly Option Spreads are one of the most ‘robust’ option trades of the ‘main’ option spread income strategies. In other words, the butterfly spread can withstand more ‘abuse’ from a volatile market than say the iron condor, diagonal, or calendar, - and still come out smelling like a rose.
One reason for this has to do [...]

The vertical spread is basic building block of the butterfly spread. In fact, the vertical spread - either in the form of a credit spread or a debit spread is a basic building block of most option spread strategies.
In the case of the butterfly spread, this option trade can be created out of a debit [...]

The butterfly spread is a delta neutral theta positive options trade that performs ideally when used on a stock or index that is range bound or not moving wildly all over the place.
The traditional butterfly strategy is built from two separate option spread strategies: the debit spread and the credit spread - and is composed [...]

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 [...]

Non directional trading enthusiasts will many times use the butterfly option strategy as a way take advantage of a stock or index or ETF that is caught in a chart range - or an underlying whose options provide good premiums but doesn’t gyrate wildly around.
Because the short strikes of these butterfly spread positions are usually [...]

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 [...]

March 2010 Expiration
Our Butterfly Spread Trade this month did beautifully. Opened this trade on 2-17-10. Closed it on 2-25-10 for a profit of just over 10% in 8 days.

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Technorati Tags: Butterfly Option, Butterfly Spread, Credit Spread, [...]

photo credit: dno1967
What is a butterfly spread trade.
A butterfly spread is an options spread trade that takes advantage of the fact that options are decaying assets.
Butterfly spread traders SELL the options that have the MOST time premium - or the options that the MOST ‘fake’ or ‘unreal’ value.
As long as the underlying they are [...]