Chapter 06 · Section 6.1

Short a Butterfly

You are short the September 40-45-50 butterfly with the underlying at 45. You:

a) are long and want the market to rally.
• b) are short and want the market to fall.
  No. Although one of the scenarios in which you will make money is if the market falls, the short butterfly is not considered a short position (despite its name).
  c) are neutral and want the market to sit.
  d) you are neutral but want the market to move in either direction.