butterfly spread |
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Definition
Options strategy that combines a bear spread and a bull spread, involving four options and three exercise prices. It requires sale/purchase of two identical options, and purchase/sale of one option with a higher exercise price and another with a lower exercise price. All options employed in this strategy must (1) be of the same type, (2) have the same underlying asset, and (3) have the same expiration date.
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butterfly spread is in the Commodities & Precious Metals Trading, Disaster Planning & Risk Management, Investing and Securities & Futures Trading subjects.
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