Build a Short Put Butterfly Strategy
What is a short put butterfly?
DirectionalLimited ProfitLimited Loss
A short put 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 put 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 put at strike A
- Buy two puts at strike B
- Sell a put at strike C