![]() ![]() ![]() A trader buys two option contracts – one at a higher strike price and one at a lower strike price and sells two option contracts at a strike price in between, wherein the difference between the high and low strike prices is equal to the middle strike price. A holder combines four option contracts having the same expiry date at three strike price points, which can create a perfect range of prices and make some profit for the holder. The option strategy involves a combination of various bull spreads and bear spreads. Definition: Butterfly Spread Option, also called butterfly option, is a neutral option strategy that has limited risk.
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