Introductory Context
"A masterclass on deploying 3-strike Call Butterfly spreads on Nifty and Bank Nifty to achieve outsized 1:5+ reward-to-risk setups on expiry day consolidation."
Strategy Dossier & Taxonomy
Strategy: Long Call Butterfly (1-2-1 Spread) | Market: NSE Derivatives | Outlook: Neutral / Target Pinning | Risk-Reward: Ultra Low Risk with High Payout Potential
1. The Core Principle in Plain English
A Long Call Butterfly is a 3-strike strategy: Buy 1 Lower Call (K₁), Sell 2 Middle Calls (K₂), and Buy 1 Higher Call (K₃), where K₂ is the exact midpoint.
It costs very little to enter and yields explosive percentage returns if the underlying index pins exactly at the middle strike K₂ on expiry day.