Name: Broken Wing Butterfly w/ Calls
Setup: Buy (long) Strike A call and Sell (short) 2 Strike B calls and Buy (long) Strike D call
Bias: Slightly Bullish
Break-Even: Strike C + Credit received
Max Profit: Limited: Strike B – Strike A + Credit received
Max Loss: Limited: Strike C – Strike D – Credit received
Margin: Difference between strike prices of the short call spread
Time Decay: Time decay is your friend as you want all of your options to expire worthless except the call at Strike A
Implied Volatility: If the underlying is trading near or outside Strike A or Strike D you want implied volatility to increase. This will increase the value of your options but also suggest a large move to get your towards Strike B. If the underlying is trading near Strike B you want volatility to decrease. Strike B is your max profit area so a move outside of this range would be a bad thing.
Notes: None at this time
Featured in Trade Review: None at this time
