Build a Long Call Butterfly Strategy
What is a long call butterfly?
NeutralLimited ProfitLimited Loss
A call butterfly spread is the combination of a bull call spread and a bear call spread. This creates a neutral strategy that is cheap and has a good risk/reward ratio.
Decreasing volatility will increase the profitable area, while increasing volatility will narrow the profitable range. Time is helpful when the position is profitable, and harmful when it isn't.
- Buy a call at strike A
- Sell two calls at strike B
- Buy a call at strike C