Butterfly Spread: What It Is and How Options Traders Use It
Warren Team
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Key terms
- OptionsContracts giving the right, but not obligation, to buy (call) or sell (put) an asset at a set price before expiration. Used for speculation, hedging, or income generation.
- SpreadThe difference between the bid price (what buyers will pay) and ask price (what sellers want). Narrower spreads indicate higher liquidity and lower transaction costs.
- Finance ChargeThe total cost of credit, including interest and fees. Calculated based on average daily balance and APR. Avoided entirely by paying statement balance in full each month.
- DeFi (Decentralized Finance)A broad category of financial applications and services built on blockchain networks that operate without traditional intermediaries like banks or brokerages. DeFi platforms allow users to lend, borrow, trade, and earn interest on their crypto assets through smart contracts. This ecosystem aims to make financial services more accessible, transparent, and open to anyone with an internet connection.
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