Christmas Tree Spread
Description
Buying one option, skipping a strike, selling two, skipping another, and buying one.
Trading Logic
Similar to a butterfly but with a wider profit zone and lower cost.
Practical Example
Stock at $100. Buy $90C, sell 3 $105C, buy 2 $110C.
P/L Curve
Chart Description
- X-Axis: Stock price at expiration
- Y-Axis: Expected P/L ($)
- Green area: Profit; Red area: Loss