Applies to derivative products. Complex
option strategy that involves selling two
calls and buying two calls on the same or different markets, with several
maturity dates . One of the options has a higher
exercise price and the other has a lower
exercise price than the other two options. The
payoff diagram resembles the shape of a butterfly.
Established by buying an at-the-money option, selling 2 out-of-the money options, and buying an out-of-the money option. A butterfly is entered anytime a credit can be received; i.e., the premiums received are more than those paid.