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Derivatives

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  • January 23, 2023
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Butterfly

In the realm of options,  a butterfly is a vanilla option trading strategy which combines an out-of-the-money strangle with an at-the-money straddle.

With respect to futures contracts, a butterfly refers to a futures trading strategy which is constructed by buying a near -month futures contract, selling two far-month futures contracts, and buying one farther-month futures. The number of delivery months and the gaps between them need not be equal.


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