The Long Put Butterfly is an options strategy involving the purchase of two put options with a lower strike price, the sale of two put options with a higher strike price, and the purchase of one put option with an intermediate strike price. This strategy is implemented when the trader expects the underlying asset's price to remain relatively stable.
The Long Put Butterfly aims to profit from the limited price movement of the underlying asset. It achieves its maximum profit when the price of the asset expires at the intermediate strike price at expiration. The maximum loss occurs if the price moves significantly beyond the strike prices of the long put options.
Adjustments to the Long Put Butterfly strategy may be made if the market conditions change. For example, if the price of the underlying asset starts moving towards one of the short put options' strike prices, an adjustment can be made by closing the position and opening a new butterfly position with the new strike price.
Adjustments to the Long Put Butterfly strategy allow traders to manage risk and potentially capture profits in changing market conditions. It is important for traders to monitor the market closely and make adjustments as necessary to align with their expectations and minimize potential losses.
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Long Put Butterfly Option Strategy | Long Put Butterfly Adjustment Explained
11 Months ago, Friday, May 26, 2023, 04:48:03 by
pamarpooja411
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Finance
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