Build a Short Call Butterfly Strategy
What is a short call butterfly?
DirectionalLimited ProfitLimited Loss
A short call butterfly is a volatility strategy that can be profitable if there is a big move in either direction. It is the opposite of a long call butterfly.
Increasing volatility or a big move is required for this strategy to become profitable. Time is harmful when the position is unprofitable, but helpful once it becomes profitable.
- Sell a call at strike A
- Buy two calls at strike B
- Sell a call at strike C