• Butterfly   Butterfly

    A butterfly is a spread of two vertical spreads. One vertical spread is bought and a second similar (same expiration date and type) vertical spread is sold such that the two vertical spreads share one strike price.

    For example:

    Buy one 110 strike call
    Sell two 105 strike calls
    Buy one 100 strike call

    This is really a position that is long a 100/105 call spread and short a 105/110 call spread.

    Butterfly spreads have both limited risk and limited reward.