Butterfly Spread With Puts
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Option traders can create butterfly spread with puts as well as with calls.
In the case of the ‘Standard’ butterfly spread – these trades are usually created utilizing only all call options or all put options. What is meant by this is the the three different legs of these trades are positioned at different strikes of course – however they are comprised of either all calls or all puts. Also, either way they are constructed, the risk diagram of each will look very much so the same if not exactly identical.
A different variation of the butterfly spread, called the iron butterfly – is built much like it’s ‘relative’ strategy called the iron condor. This butterfly option trade is made from both call options and put options just like the iron condor. The difference between the two is that the strikes which are sold are done so at the exact same stike on the butterfly spread – and also the wings which are purchased are usually done so a faily wide distance apart.
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