Sabit Rahimov
Member
In terms of profit made:
1. for volitile market
long straddle (significant profit) > long butterfly (small loss)
long straddle (significant profit) > short butterfly (modest profit)
in the short butterfly, modest profit is due to limiting its up and down profit potential by strike price K1 and K3
2. for non volitile market
short straddle (significant profit) > short butterfly (small loss)
short straddle (significant profit)> long butterfly (modest profit)
But for the long straddle in case of non volitile market and the short straddle in case of volitile market significant loss is inevitable.
Butterfly spread in either cases generate modest profit and small loss respectively. By straddle, investor can experience either significant profit or significant loss depending on the market conditions and positions accordingly.
Thanks!
1. for volitile market
long straddle (significant profit) > long butterfly (small loss)
long straddle (significant profit) > short butterfly (modest profit)
in the short butterfly, modest profit is due to limiting its up and down profit potential by strike price K1 and K3
2. for non volitile market
short straddle (significant profit) > short butterfly (small loss)
short straddle (significant profit)> long butterfly (modest profit)
But for the long straddle in case of non volitile market and the short straddle in case of volitile market significant loss is inevitable.
Butterfly spread in either cases generate modest profit and small loss respectively. By straddle, investor can experience either significant profit or significant loss depending on the market conditions and positions accordingly.
Thanks!
Last edited: