Core Viewpoint - The article introduces the Long Butterfly Spread options strategy, which serves as a "price range insurance" for investors expecting a stock to remain stable within a certain price range, allowing for limited risk and potentially high returns [1][3]. Strategy Composition - The strategy involves trading three options: buying one lower strike Call (X1), buying one higher strike Call (X3), and selling two middle strike Calls (X2), with the relationship X2 = (X1 + X3)/2 [1][2]. - The initial net premium paid is calculated as C1 + C3 - 2 × C2, where C1, C2, and C3 are the premiums for the respective options [1][5]. Investment Significance - The core of the strategy is to have the underlying asset's price remain close to the middle strike price (X2) before the options expire, with minimal volatility [3]. - It combines elements of both Bull Call Spread and Bear Call Spread, making it a neutral strategy that profits in sideways markets [3]. Profit and Loss Characteristics - Maximum profit occurs when the stock price equals the middle strike price (X2), while maximum loss is limited to the initial net premium paid [6][8]. - The strategy is characterized by a small risk of loss, with profits increasing as the stock price approaches the middle strike price [6][10]. Practical Application Example - An example is provided where an investor believes a stock priced at $633 will remain stable around $635. The investor sets up a Long Butterfly Spread by buying Calls at $630 and $640, and selling Calls at $635, resulting in a maximum loss of $25 and a maximum profit of $475 [7][8]. Recommendations for Use - The strategy is best suited for short to medium-term contracts (20-30 days until expiration) and should be executed when implied volatility is high [10][11]. - Investors are advised to avoid holding positions until expiration to mitigate risks associated with significant price movements [12]. Conclusion - The Long Butterfly Spread is a low-risk strategy ideal for investors seeking to profit from minimal price fluctuations in stable markets, particularly when volatility is expected to decrease [6][10].