Call spreads

Call spreads

Payoff chart from buying a butterfly spread. Call spreads from a long butterfly spread position. A long butterfly position will make profit if the future volatility is lower than the implied volatility.

All the options have the same expiration date. A short 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 now the middle strike option position is a long position and the upper and lower strike option positions are short. L graph is quite complicated and changes considerably as time moves forward to the expiration. Margin requirements for all options positions, including a butterfly, are governed by what is known as Regulation T. However brokers are permitted to apply more stringent margin requirements than the regulations.

The double option position in the middle is called the body, while the two other positions are called the wings. In case the distance between middle strike price and strikes above and below is unequal, such position is referred to as “broken wings” butterfly. New York : New York Institute of Finance. Cet article est une ébauche concernant la finance.

Spread est un mot anglais utilisé en finance qui désigne de manière générale, l’écart ou le différentiel entre deux taux ou indices de point. Sa définition précise varie en fonction du type de marché sur lequel on se trouve. Le  bid et ask spread  est la différence entre le prix ask et le prix bid. Le prix ask correspond au prix auquel il est possible d’acheter un instrument financier, tandis que le prix bid correspond au prix auquel il est possible de vendre un instrument financier.

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