When to Enter Butterfly Spread Option Strategy

You would normally attempt a butterfly spread option strategy when you want to take advantage of high option volatility and the range of stock prices in order to collect premiums.

The principal elements you should consider when engaging a butterfly spread are:

• Stock option volatility is high, in fact, the higher the better

• There are good reasons for you to believe that the underlying stock will be traded within a given price range

• The timing of entering the butterfly option trading strategy is favorable

• The expiration date of the options are less than 60 days away