Butterfly Spread
A butterfly spread is an options trading strategy that merges bull and bear spreads to secure a modest profit. It involves four positions across four options contracts, all sharing the same expiration date but differing in strike prices. Typically, this setup includes buying one lower-strike option, selling two middle-strike options, and buying one higher-strike option (or vice versa), creating a profit zone with limited risk. The strategy aims to capitalize on minimal price movement, offering a defined payoff while capping potential losses, making it appealing for traders expecting low volatility.
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