A call butterfly spread combines a call bull spread with a call bear spread.

Question

Quizplus · Accepted Answer

A call butterfly spread involves buying one call option at a lower strike price, selling two call options at a higher strike price, and buying another call option at an even higher strike price. This combination creates a limited risk, limited reward options strategy with a "body" at the lower strike price and "wings" at the higher strike prices, resembling the shape of a butterfly. The two call spreads involved are a bull call spread (buying the lower strike call and selling the higher strike calls) and a bear call spread (selling the higher strike calls and buying the even higher strike call).

A Call Butterfly Spread Combines a Call Bull Spread with a Call