Neutral strategies: profiting from where price does not go
Neutral strategies do not need a direction. They express a view on a range: that the underlying will stay inside one, or break out of it. Most are four-legged structures whose maximum profit and maximum loss are both known the moment they are opened.
What are neutral strategies? Neutral option strategies are multi-leg positions built to profit when the underlying stays within, or moves outside, a defined price range rather than in a particular direction. Iron Condors and Iron Butterflies are the best-known, both collecting a net credit with a defined maximum loss.
Iron Condor
NeutralAn Iron Condor is a defined-risk neutral strategy that sells an out-of-the-money put spread and an out-of-the-money call spread, collecting a net cre…
Iron Butterfly
NeutralAn Iron Butterfly is a defined-risk neutral strategy that sells an at-the-money put and call on one strike and buys wings above and below, collecting…
Long Butterfly
NeutralA Long Butterfly is a defined-risk neutral strategy of three equally spaced call strikes — buy one lower, sell two middle, buy one higher — for a sma…
Short Butterfly
VolatileA Short Butterfly is a defined-risk, three-strike call strategy that collects a small credit kept only if the underlying finishes away from the middl…
Long Condor
NeutralA Long Condor is a defined-risk neutral strategy built from four call strikes for a debit, paying a flat maximum across the range between its two inn…
Short Condor
VolatileA Short Condor is a defined-risk strategy of four call strikes that collects a small credit kept only if the underlying finishes outside the range, a…
Christmas Tree Spread
NeutralA Christmas Tree Spread is a defined-risk, mildly bullish strategy built from calls in a 1×3×2 ratio — buy one lower, sell three middle, buy two high…
Box Spread
Direction-agnosticA Box Spread combines a bull call spread and a bear put spread on the same two strikes so the payoff is fixed at the strike distance whatever the und…
Jade Lizard
NeutralA Jade Lizard is a neutral-to-bullish strategy that sells an out-of-the-money put and an out-of-the-money call spread, structured so the total credit…
Broken Wing Butterfly
NeutralA Broken Wing Butterfly is a defined-risk butterfly with deliberately unequal wing widths, skewed so the structure costs almost nothing and the loss …