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.
• c) are neutral and want the market to sit.
  No. In a long butterfly, you want the market to sit. The short butterfly makes money only when the market makes a substantial move.
  d) you are neutral but want the market to move in either direction.