Question 1

What is a Long Call Butterfly?

Accepted Answer

You buy (long) one OTM Call, sell (short) two further OTM Calls, buy (long) one even further OTM Call

Question 2

What is the max loss of a Long Call Butterfly?

Accepted Answer

The max loss is Cost of the Long Call Butterfly.

Question 3

When do I breakeven when utilizing a Long Call Butterfly strategy?

Accepted Answer

The breakeven is defined as Lowest strike plus debit paid or highest strike minus debit paid.

Question 4

What is the typical application of a Long Call Butterfly?

Accepted Answer

The typical applicatio is: 1. Speculate on a precise increase in price at expiration and flat to decreasing volatility.