A bet on where the stock lands, not which way it goes. This lesson shows why a butterfly is cheap, and why that is exactly the catch.
After this lesson you can
- Work out a butterfly's cost, best case, worst case and both breakevens
- See it as a bull spread and a bear spread joined at the middle strike
- Understand why it's cheap: the odds of finishing near the peak are low
- Choose the middle strike and the width from your forecast, and know why to close before the last week
- Manage four legs without paying the spread four times
Chapters
- 0:00A bet on where it lands
- 1:23Three strikes, four options
- 2:35What it pays at expiration
- 3:56Two spreads in one
- 5:29Cheap, and why
- 6:44Waiting for the tent
- 8:06Width and location
- 9:33Managing a butterfly
- 10:58Five mistakes
- 12:09The whole lesson on one screen