Question 1

What is a Long Put Butterfly?

Accepted Answer

You buy (long) one OTM Put, sell (short) two further OTM Puts, buy (long) one even further OTM Put

Question 2

What is the max loss of a Long Put Butterfly?

Accepted Answer

The max loss is Cost of the Long Put Butterfly.

Question 3

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

Accepted Answer

The breakeven is defined as Highest strike minus debit paid or lowest strike plus debit paid.

Question 4

What is the typical application of a Long Put Butterfly?

Accepted Answer

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