The Option Trading Website
| |||||
> Home
> Advanced Strategies
> Butterfly Spread : A First Attempt
 Butterfly Spread : A First Attempt
Issued on August 29 2010 par Strategies Options
Butterfly Spread is a famous strategy using options.
Combos are sometimes much more interesting than a single option.
Butterfly spread is one of those combos. I - Features 3 options are needed for a butterfly, same type (calls or puts) - Same maturity - Same underlying - Strikes are set in order to have a strike that is equidistant to others. For example: K1=80 K2=100 K3=120 and K2-K1=K3-K2=20 or, K1=12 K2=15 K3=18 and K2-K1=K3-K2=3 II - Strategy The butterfly spread is composed with: - A long option struck at K1 - A short 2 options struck at K2 - A long option struck at K3 III - Graphs 1 Year Butterfly90/100/110 in 2 dimensions  This works out only at expiry. Before expiry, a 3 dimensions graph is needed. If one assumes a zero cost for the butterfly spread, it leads to:  The obvious advantage is the small bet for a possible great payoff. Next : Butterfly Spread : The Delta ∆ Previous: Iron Condor - SO Set Up Download the pricer here Advanced Strategies - INDEX Advanced Strategies - CHAPTER I Advanced Strategies - CHAPTER II Advanced Strategies - CHAPTER III Advanced Strategies - CHAPTER IV Advanced Strategies - CHAPTER V Strategies Options |
Other articles
- Options 101 -
Monte Carlo Simulation : a first attempt
There are different ways to price options. Closed forms, numerical and tree models are amongst them. Monte Carlo is another one.
- Options 101 -
Garman-Klass Volatility
First Close to close, then Highs and lows. Next both with opening price added !
- Other Derivatives -
Stability Warrants : A First Attempt
Stability Warrants are listed double knock out options issued by banks
- Basic Strategies -
Straddle : The Gamma Г
Straddle is the most famous strategy when trying to 'gamma scalp' : this is why...
- Currency Options Trading Strategies -
Eur/USD: Put spread (3rd Update)
Euro-Dollar finally had choosen 1.31 as a target
- Pricing Models -
Black & Scholes : Gamma Г
In the Black & Scholes model, gamma Г is just the second derivative of an option price with respect to the spot.
|
Strategies-Options.com - © 2009 - 2012 Tous Droits réservés
|
|
|
|
|
|
|
|
| www.strategies-options.com est un site d'éducation et de formation sur les marchés dérivés, en particulier les options, les options binaires, les warrants, les turbo warrants et les certificats.
Même si nous faisons notre maximum pour produire du contenu de qualité, nous vous remercions de nous contacter si vous remarquiez une erreur afin que nous puissions la corriger le plus rapidement possible. Les stratégies présentées ne sont en aucun cas des conseils en investissements, mais elles servent à illustrer notre propos dans un but strictement éducatif. Elles sont basées sur notre expérience de ces marchés. Vous êtes responsables de l'utilisation de ces stratégies dans l''éventualité où vous souhaiteriez les reproduire. Il reste strictement interdit de diffuser, reproduire ou publier de quelque manière que ce soit tout ou partie du contenu du site www.strategies-options.com, sous quelque forme rédactionnelle, graphique ou d'image, que ce soit, sans notre consentement. |
 |