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| In ], a butterfly is a limited risk, non-directional ] that is designed to have a large ] of earning a small limited profit when the future ] of the ] is expected to be different from the ]. | |||
| == Short butterfly == | |||
| A ] butterfly position will make profit if the future volatility is higher than the implied volatility. | |||
| A short butterfly options strategy consists of the same options as a long butterfly. However all the long option positions are short and all the short option positions are long. | |||
| == Variations of the butterfly == | |||
| The double option position in the middle is called the body, while the two other positions are called the wings. | |||
| The option strategy where the middle two positions have different strike price is known as an ]. | |||
| In an unbalanced butterfly the variable "a" has two different values. | |||
| ==References== | |||
| * {{cite book | |||
| | last = McMillan| first = Lawrence G. | |||
| | title = Options as a Strategic Investment | |||
| | edition = 4th ed. | |||
| | publisher = New York : New York Institute of Finance | |||
| | year = 2002 | |||
| | isbn = 0-7352-0197-8 | |||
| }} | |||
| ==External links== | |||
| * graphically illustrates component options in long and short butterflies. | |||
| * things you should know about Butterfly Spreads | |||
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