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Short Call Butterfly
Short Call Butterfly
Strategy –
Breakeven points
Upper Breakeven points
=Higher Strike price – Net premium received = 12000 – 3.51=11996.49
Lower Breakeven points
= Lower Strike price + Net premium received = 11850 + 3.51 =11853.51
Breakeven points has not been touched so I will secure the net premium
received and close my position.
Impact of Options Greeks :
Delta: The net delta of a Short Call Butterfly spread remains close to zero.
Vega: The Short Call Butterfly has a positive Vega. Therefore, one should buy
Short Call Butterfly spread when the volatility is low and expect to rise.
Theta: With the passage of time, if other factors remain same, “Theta” will have
a negative impact on the strategy, because option premium will erode as the
expiration dates draws nearer.
Gamma: The Short Call Butterfly will have a short gamma when it is initiated
DELTA- The net delta of a Short Call Butterfly spread remains close to zero.
This is delta neutral strategy so delta is close to zero.
Gamma –
Vega
The Short Call Butterfly has a positive Vega. Therefore, one should buy Short
Call Butterfly spread when the volatility is low and expect to rise.
Theta
Theta: With the passage of time, if other factors remain same, “Theta” will have
a negative impact on the strategy, because option premium will erode as the
expiration dates draws nearer