The short put butterfly is very similar to the long put butterfly. One difference is that a short put butterfly is bullish on volatility. It is a limited profit, limited risk options strategy. There are usually three striking prices involved in a short put butterfly. A short put butterfly can be constructed by writing one lower striking out-of-the-money put, buying two … [Read more...]
Long Put Butterfly Explained
The long put butterfly spread is an options trading strategy. To be precise, it is a limited profit, limited risk options trading strategy that is taken when the options trader thinks that the underlying security will not rise or fall much by expiration. There are usually three striking prices involved in a long put butterfly. It is constructed by buying one lower striking put, … [Read more...]
Covered Call [Explained]
A strategy in options trading whereby call options are written against a holding of the underlying security, is a covered call. The investor using a covered call gets to earn a premium writing calls while at the same time appreciate all benefits of underlying stock ownership, such as dividends and voting rights, unless he is assigned an exercise notice on the written call and … [Read more...]
Short Call Butterfly Explained
The short butterfly is very similar to the long butterfly but bullish on volatility. It is a limited profit, limited risk options trading strategy. There are 3 striking prices involved in a short butterfly spread. A short butterfly can be constructed using calls or puts. Using calls, the short butterfly can be constructed by writing one lower striking in-the-money call, buying … [Read more...]
Long Call Butterfly- How to Trade
An independent trade, that uses a combination of four calls, and is a bidirectional strategy is called a long call butterfly. This means, it will be profitable if the price does not move in either direction. The trader usually buys a single in the money call contract and a single out of the money call contract, and then sells two at the money call contracts. The lower striking … [Read more...]