This spread is typically created using a ratio of 1 ITM option, 2 ATM options, 1 OTM option.

The distance between the short strike and long strike, less the debit paid. How to Calculate Breakeven s: Higher Long Option Strike - Debit Paid - Downside: At tastytrade, we tend to buy Call or Put Butterfly spreads to take advantage of the non-movement of an underlying stock.

This is a low probability trade, but we use this strategy when implied volatility is high, as the butterfly spread then trades cheaper.

The spread trades cheaper in this situation since the price of the In-The-Money option consists primarily of intrinsic value. Therefore selling the ATM options covers a higher percentage of the cost of purchasing both of the long options.

Long Call Butterfly Spread | Butterfly Spreads - The Options Playbook

When do we close Butterflies? Since achieving maximum profit on a Butterfly is highly unlikely, the profit target on this position is generally lower. When do we manage Butterflies? Long Butterfly spreads are low probability, low risk trades. To reset your password, please enter the same email address you use to log in to tastytrade in the field below. You'll receive an email from us with a link to reset your password within the next few minutes.

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When does one sell a put option, and when does one sell a call option?

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Butterfly (options) - Wikipedia

Please read Characteristics and Risks of Standardized Options before deciding to invest in options. Trades for 7 days. Join Now Sign In Help Open A Tastyworks.

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