LONG BUTTERFLY STRATEGY

Short two calls at the middle strike, and long one call each at the lower and upper strike.  The upper and lower strikes (wings) must both be equidistant from the middle strike (body), and all the options must be the same expiration.

Max Loss

The maximum loss would occur should the underlying stock be outside the wings at expiration.

Max Gain

The maximum profit would occur should the underlying stock be at the middle strike at expiration. 

Types of derivatives available in share markets

There are different types of derivatives available in share markets which are recognized as financial instruments. Share market experts accept derivatives as contracts between two or more parties (one type of security) that are practiced for trading or for share markets. The fluctuation of price and value of a derivative totally depends upon one or more financial assets.

In western developed economies there are various types of derivatives that are introduced much before. In National Stock Exchange of India, types of derivatives are used almost 10 years back. A few years after its released date in NSE and BSE, derivatives occupied an important financial platform to earn profit for shareholders or traders. Now these different types of derivatives are integral parts of Indian share markets.