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Chapter 4. Volatility Strategies > Short Call Butterfly

4.6. Short Call Butterfly

ProficiencyDirectionVolatilityAsset LegsMax RiskMax RewardStrategy Type
+
   +   
IntermediateNeutralHigh• Short CallCappedCappedCapital Gain
   • Two Long Calls   
   • Short Call   


4.6.1. Description

The Short Call Butterfly is another volatility strategy and is the opposite of a Long Call Butterfly, which is a rangebound strategy. The reason that short butterflies aren't particularly popular is because even though they produce a net credit, they offer very small returns compared to straddles and strangles with only slightly less risk.


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