Compare Strategies
IRON BUTTERFLY | CHRISTMAS TREE SPREAD WITH PUT OPTION | |
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About Strategy |
Iron Butterfly Option StrategyThis strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. A trader will buy 1 OTM Put Option, sell 1 ATM Put Option, sell 1 ATM Call Option, buy 1 OTM Call Option. Due to offsetting of long and short positions, this strategy bags limited profit with limited risk.
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Christmas Tree Spread with Puts Option StrategyThis Strategy is an advance option strategy that consists of three legs and six total options. In this strategy buying one put at strike price D, skipping strike price C, writes three calls at strike price B, and buying two calls at strike price A for same expiration dates for neutral to bearish forecast. An investor used this strategy to potential returns .. |
IRON BUTTERFLY Vs CHRISTMAS TREE SPREAD WITH PUT OPTION - Details
IRON BUTTERFLY | CHRISTMAS TREE SPREAD WITH PUT OPTION | |
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Market View | Neutral | Bearish |
Type (CE/PE) | CE (Call Option) + PE (Put Option) | CE (Call Option) |
Number Of Positions | 4 | 6 |
Strategy Level | Advance | Advance |
Reward Profile | Limited | Limited |
Risk Profile | Limited | Limited |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received | Lowest strike prices + the half premium – premium paid |
IRON BUTTERFLY Vs CHRISTMAS TREE SPREAD WITH PUT OPTION - When & How to use ?
IRON BUTTERFLY | CHRISTMAS TREE SPREAD WITH PUT OPTION | |
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Market View | Neutral | Bearish |
When to use? | This strategy is implemented when a trader is bearish on the volatility of market and neutral on the market movements. | This Strategy is used when an investor wants potential returns. |
Action | Buy 1 OTM Put, Sell 1 ATM Put, Sell 1 ATM Call, Buy 1 OTM Call | Buying one ATM, Selling 3 Puts, Buying one more OTM Put |
Breakeven Point | Upper Breakeven Point = Strike Price of Short Call + Net Premium Received, Lower Breakeven Point = Strike Price of Short Put - Net Premium Received | Lowest strike prices + the half premium – premium paid |
IRON BUTTERFLY Vs CHRISTMAS TREE SPREAD WITH PUT OPTION - Risk & Reward
IRON BUTTERFLY | CHRISTMAS TREE SPREAD WITH PUT OPTION | |
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Maximum Profit Scenario | Net Premium Received - Commissions Paid | Equal middle strike price – higher strike price – the premium |
Maximum Loss Scenario | Strike Price of Long Call - Strike Price of Short Call - Net Premium Received + Commissions Paid | Net Debit paid for the strategy. |
Risk | Limited | Limited |
Reward | Limited | Limited |
IRON BUTTERFLY Vs CHRISTMAS TREE SPREAD WITH PUT OPTION - Strategy Pros & Cons
IRON BUTTERFLY | CHRISTMAS TREE SPREAD WITH PUT OPTION | |
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Similar Strategies | Long Put Butterfly, Neutral Calendar Spread | Butterfly spreads |
Disadvantage | • Large commissions involved. • Probability of losses are higher. | • Potential profit is lower or limited. |
Advantages | • Less amount of capital investment, steady income with low risk. • Traders can predict maximum loss and profit. • Versatile strategy, investors can transform position into bear call spread or bull put spread easily. | • The potential of loss is limited. |