Butterfly Spread Strategy
NeutralAdvanced3-Strike
Create a profit zone around a target price using three different strikes with limited risk.
How It Works
1
Buy Wings: Buy lower and upper strike options for protection.
2
Sell Center: Sell two middle strike options for premium.
3
Profit Zone: Maximum profit if stock pins at middle strike.
Key Metrics
Max Profit:Strike Width - Net Debit
Max Loss:Net Debit Paid
Upper Breakeven:Middle + (Max Profit - Debit)
Lower Breakeven:Middle - (Max Profit - Debit)
Best Case:Stock at middle strike