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Chapter 5. Sideways Strategies > Long Put Butterfly

5.5. Long Put Butterfly

ProficiencyDirectionVolatilityAsset LegsMax RiskMax RewardStrategy Type
+
   +   
IntermediateNeutralLow• Long PutCappedCappedCapital Gain
   • Two Short Puts   
   • Long Put   


5.5.1. Description

The Long Put Butterfly is another rangebound strategy and is the opposite of a Short Put Butterfly, which is a volatility strategy. Long butterflies are quite popular because they offer a good risk/reward ratio, together with low cost. The long options at the outside strikes ensure that the risk is capped on both sides, and this is a much more conservative strategy than the Short Straddle.


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