A butterfly spread is one of the neutral option trading strategies that combines bull and bear spreads with a fixed risk and limited profit. The options with higher and lower strike prices are equidistant from the at-the-money options.
The long butterfly call spread involves buying an ITM call option, writing two ATM call options, and then buying an OTM call option.
The short butterfly spread strategy involves writing one in-the-money call option, buying two at-the-money call options, and selling one out-of-the-money call option Option to write two ATM call options and then buy one OTM call option.
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