Gold/USD
When to Use
A bearish butterfly is typically used when you expect the underlying asset to decline moderately. It is best suited for markets where you anticipate low to moderate volatility and a slight downward trend.
Graphical Representation
The profit and loss graph for a bearish butterfly spread typically shows a peak at the strike price of the sold calls (ATM), with profits decreasing as the price moves away from this strike price. The graph illustrates limited risk and limited reward, with maximum profit at the middle strike price and breakeven points on either side.
This strategy allows traders to capitalize on specific market conditions while managing risk effectively.
A bearish butterfly is typically used when you expect the underlying asset to decline moderately. It is best suited for markets where you anticipate low to moderate volatility and a slight downward trend.
Graphical Representation
The profit and loss graph for a bearish butterfly spread typically shows a peak at the strike price of the sold calls (ATM), with profits decreasing as the price moves away from this strike price. The graph illustrates limited risk and limited reward, with maximum profit at the middle strike price and breakeven points on either side.
This strategy allows traders to capitalize on specific market conditions while managing risk effectively.
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