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Butterfly

A trading strategy involving three option positions with three separate Strike Prices but the same Expiration Date. The combination is designed to create a potential gain greater than the potential loss, although both up-side and down-side are limited. The number of options in Leg one is double that of the positions taken in Legs one and three, with a Strike Price exactly intermediate between them. Butterfly structures can also be traded in the form of swaps.

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