• The butterfly spread is an option strategy that combines bullish and bearish spreads.

  • These are neutral strategies with fixed risk and limited profits and losses.
  • Butterfly spreads pay off the most if the underlying asset does not change before the option expires.
  • These spreads use four options and three different strike prices.
  • The upper and lower strike prices are equidistant from the average strike price, or at-the-money strike price.