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Chapter 4. Volatility Strategies > Short Put Butterfly

4.7. Short Put Butterfly

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


4.7.1. Description

The Short Put Butterfly is identical to the Short Call Butterfly, except that it uses puts instead of calls. It is the opposite of a Long Put 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 with straddles and strangles with only slightly less risk.


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