Name: Christmas Tree Butterfly w/ Calls

Setup: Buy (long) Strike A call and Sell (short) 3 Strike C calls and Buy (long) 2 Strike D calls

Bias: Slightly Bullish


Break-Even: Two break-even points:


  • Strike A + Debit paid
  • Strike D – ½ Debit paid

Max Profit: Limited: Strike C – Strike A – Debit paid

Max Loss: Limited: Debit paid

Margin: No margin required

Time Decay: Time decay is your friend as you want all options except Strike A to expire worthless.

Implied Volatility: After the underlying reaches Strike C you want volatility to decrease.  A decrease here will increase the value of your position, and also decrease the chance you will see a big move outside Strike C.

Notes: None at this time

Featured in Trade Review: None at this time