Chapter 06 · Section 6.1

Short Butterfly Call Spread

Short 1 100 Call
Long 2 110 Calls
Short 1 120 Call

How would you construct this spread using puts?

a) Short 1 100 Put, Long 2 110 Puts, Short 1 120 Put.
b) Long 1 100 Put, Short 2 110 Puts, Long 1 120 Put.
• c) Short 1 100 Put, Long 2 110 Puts, Long 1 120 Put.
  No. A butterfly spread is symmetrical. In order to get two "wings" in the spread, you must have a high exercise and a low exercise option of one side (i.e. short or long) surrounding a medium exercise option of another side.

(Click here for help)