Part 6 Institutional Trading

Advanced & Professional Strategies
(a) Butterfly Spread

Combination of 3 strike prices (buy 1 low strike call, sell 2 middle strike calls, buy 1 high strike call).

Profits from minimal price movement.

(b) Calendar Spread

Sell near-term option and buy long-term option at the same strike.

Profits from time decay difference.

(c) Ratio Spread

Buy 1 option, sell 2 options at different strikes.

Increases reward potential but adds risk.

(d) Box Spread

Arbitrage-like strategy combining bull and bear spreads.

Used by professionals for risk-free returns (if pricing inefficiency exists).