Long Call Butterfly Vs Short Call Butterfly Options Trading Strategy Comparison

Compare Long Call Butterfly and Short Call Butterfly options trading strategies. Find similarities and differences between Long Call Butterfly and Short Call Butterfly strategies. Find the best options trading strategy for your trading needs.

Long Call Butterfly Vs Short Call Butterfly

	Long Call Butterfly	Short Call Butterfly


About Strategy	Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price. Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls.... Read More	Short Call Butterfly (or Short Butterfly) is a neutral strategy similar to Long Butterfly but bullish on the volatility. This strategy is a limited risk and limited profit strategy. This strategy consists of two long calls at a middle strike (or ATM) and one short call each at a lower and upper strike. All the options must have the same expiration date. Also, the upper and lower strikes (or wings) must both be equidistant from the middle strike (or body). In simple terms, it involves Sell 1 ITM Call, Buy 2 ATM Calls and Sell 1 OTM Call. The strike prices of all Options should be at equal distance from the current price as shown in the example below. The usual Short Butterfly strategy looks like as below for NIFTY current index value as 1... Read More
Market View	Neutral	Neutral
Strategy Level	Advance	Advance
Options Type	Call	Call
Number of Positions	4	4
Risk Profile	Limited	Limited
Reward Profile	Limited	Limited
Breakeven Point		2 Break-even Points

When and how to use Long Call Butterfly and Short Call Butterfly?

	Long Call Butterfly	Short Call Butterfly
When to use?	This strategy should be used when you're expecting no volatility in the price of the underlying.	This strategy is meant for special scenarios where you foresee a lot of volatility in the market due to election results, budget, policy change, annual result announcements etc.
Market View	Neutral Neutral on the underlying asset and bearish on the volatility.	Neutral When you are unsure about the direction in the movement in the price of the underlying but are expecting high volatility in it in the near future.
Action	Sell 2 ATM Call Buy 1 ITM Call Buy 1 OTM Call	Buy 2 ATM Call Sell 1 ITM Call Sell 1 OTM Call
Breakeven Point	Upper Breakeven = Higher Strike Price - Net Premium Lower Breakeven = Lower Strike Price + Net Premium	2 Break-even Points There are 2 break even points in this strategy. Lower Break-even = Lower Strike Price + Net Premium Upper Break-even = Higher Strike Price - Net Premium

Compare Risks and Rewards (Long Call Butterfly Vs Short Call Butterfly)

	Long Call Butterfly	Short Call Butterfly
Risks	Limited Risk in the Long Call Butterfly options strategy is limited to the net premium paid.	Limited The maximum risk is limited. Maximum Risk = Higher strike price- Lower Strike Price - Net Premium
Rewards	Limited Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit.	Limited The profit is limited to the net premium received. This happens when the price of the underlying is trading beyond the range of strike prices at expiration date.
Maximum Profit Scenario	Only ITM Call exercised	All Options exercised or not exercised
Maximum Loss Scenario	All options exercised or all options not exercised.	Only ITM Call exercised

Pros & Cons or Long Call Butterfly and Short Call Butterfly

	Long Call Butterfly	Short Call Butterfly
Advantages	Profit earning strategy with limited risk in a less volatile market.	This strategy requires no investment as net premium is positive and received. It allows you to benefit from high volatile market scenarios without the need to speculate on the direction of price movement.
Disadvantage	Premiums and brokerage paid on multiple position may eat your profits.	Profitability depends on significant movement in the price of the underlying.
Simillar Strategies		Long Straddle, Long Call Butterfly

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