标题: Difference between long butterfly and Short straddle [打印本页] 作者: pimpineasy 时间: 2011-7-11 15:19 标题: Difference between long butterfly and Short straddle
Hi,
I am aware of difference between long butterfly and short straddle in a way that straddle will produce infinite loss where as butterfly will have limited loss but I can't understand why would someone go for straddle instead of butterfly. Why would somone want to go for infinite loss against limited one/作者: zwjy 时间: 2011-7-11 15:19
yeah, the confidence level is money, it is the probability you input into calculating the option value作者: strikethree 时间: 2011-7-11 15:19
Straddles are actually one of the most important instruments for option-traders: say I quote a bid for a customer selling a swaption. I would than do delta with swaps-desk and (as i'm long vega from the swaption) sell atm-straddles to hedge my vega. Atm-straddles have zero delta and are therefore THE instrument to handle vega. You could also handle the volatility with mbs, bonds with optionality, etc with straddles...作者: pennyless 时间: 2011-7-11 15:19
short straddle provides positive cash flow upfront. Long butterfly requires outflow of cash at initiation.
