29 lines
1.4 KiB
Plaintext
29 lines
1.4 KiB
Plaintext
Iron Butterflies
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Much like the relationship of the condor to the iron condor, a butterfly has
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its synthetic equal as well: the iron butterfly.
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Short Iron Butterfly
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Long one put with strike A; short one put with a higher strike, B; short one
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call with strike B; long one call with a strike higher than B, C. The options
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are on the same security and in the same expiration cycle. The distances
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between the strikes of the put spread and between the strikes of the call
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spread are equal.
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Short Iron Butterfly Example
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Buy 1 XYZ December 50 put (A)
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Sell 1 XYZ December 60 put (B)
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Sell 1 XYZ December 60 call (B)
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Buy 1 XYZ December 70 call (C)
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Long Iron Butterfly
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Short one put with strike A; long one put with a higher strike, B; long one
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call with strike B; short one call with a strike higher than B, C. The options
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are on the same security and in the same expiration cycle. The distances
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between the strikes of the put spread and between the strikes of the call
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spread are equal. The put debit spread has the same distance between the
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strike prices as the call debit spread.
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Long Iron Butterfly Example
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Sell 1 XYZ December 50 put
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Buy 1 XYZ December 60 put
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Buy 1 XYZ December 60 call
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Sell 1 XYZ December 70 call
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These spreads were defined in terms of both long and short for each
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strategy. Whether the spread is classified as long or short depends on
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whether it was established at a credit or a debit. Debit condors or butterflies |