Can anybody explain the butterfly spread option to me?
A butterfly spread option involves buying two calls and selling two calls on the same stock. For instance, if a stock is trading at $20.00, you would want to buy one call (or multiples) at $17.50, buy one call at $22.50, and sell two calls at $20.00. As long as the stock moves between $17.50 and $22.50, you should be able to profit. There is limited upside to this strategy, as the butterfly spread option is a neutral to bullish strategy. You can also do the same with puts. Click on this link from Investopedia.com for more information regard this spread and an out of the money butterfly spread. Good luck with your investing!
