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| In [[finance]] an '''iron butterfly,''' also known as the ironfly, is the name of an advanced, neutral-outlook, [[options strategies|options trading strategy]] that involves buying and holding four different options at three different [[strike price]]s. It is a limited-risk, limited-profit trading strategy that is structured for a larger probability of earning smaller limited profit when the underlying stock is perceived to have a low volatility.
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| To set up an iron butterfly, the options trader buys a lower strike out-of-the-money put, sells a middle strike at-the-money put, sells a middle strike at-the-money call and buys another higher strike out-of-the-money call. This results in a net credit to put on the trade, hence it is a credit spread.
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| If there is no [[arbitrage]], the butterfly and iron butterfly have the following price relationship:
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| <math>\mbox{ironfly} = \Delta(\mbox{butterfly strike price}) \times (1+rt) - \mbox{butterfly} </math> | |
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| ==References==
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| * {{cite book
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| | last = McMillan| first = Lawrence G.
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| | title = Options as a Strategic Investment
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| | edition = 4th ed.
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| | publisher = New York : New York Institute of Finance
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| | year = 2002
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| | isbn = 0-7352-0197-8
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| }}
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| {{investment-stub}}
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| {{Derivatives market}}
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| [[Category:Options (finance)]] | |
| [[Category:Derivatives (finance)]]
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Latest revision as of 03:40, 19 December 2014
Hello, my name is Andrew and my spouse doesn't like it at all. It's not a typical thing but what I like doing is to climb but I don't have the time recently. Her family members lives in Ohio. Distributing production is exactly where my main income comes from and it's something I truly enjoy.
my webpage - best psychic readings [www.octionx.sinfauganda.co.ug]