Name: Christmas Tree Butterfly w/ Puts

Setup: Buy (long) 2 Strike A puts and Sell (short) 3 Strike B puts and Buy (long) Strike D put

Bias: Slightly Bearish


Break-Even: Two break-even points:


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

Max Profit: Limited: Strike D – Strike B – 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 D to expire worthless.

Implied Volatility: After the underlying reaches Strike B 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 B.

Notes: None at this time

Featured in Trade Review: None at this time