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Modified Put Butterfly

A neutral to bullish option strategy that bears resemblance to a long put butterfly with an exception that the long in-the-money puts have a strike price closer to the central strike price of the short puts. Put another way, this strategy involves buying one out-of-the-money (OTM) put option, selling two at the money (ATM) put options, and buying one in-the-money (ITM) put option, all with the same expiration month out or less. For example, suppose the shares of XYZ company are trading for $100 on April 15, 2013. An investor may establish a modified put butterfly by buying one May 2013 90 put (OTM put), selling two May 2013 100 puts (ATM puts), and buying one May 2013 105 put (ITM put).


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