This Strategy involves simultaneously selling a call option and a put option at one strike price, buying a call option and a put option at a lower strike price, and selling a call option and a put option at an even lower strike price. All of the options have the same expiration date and are typically used in a neutral market outlook. The strategy is designed to profit from a narrow trading range in the underlying security.
The trader profits from the strategy if the price of the underlying security remains within a certain price range at expiration. If the price of the security is outside of this range, the trader will experience a loss.
Leg 2 plus the net debit
Leg 2 minus the net debit
Stock price to be less than Leg 1 or more than Leg 4
is limited and is equal to the difference between the prices at which the options were sold and bought.
is limited to net debit entered for this strategy
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