Not sure how a butterfly works or makes money?
This video is in response to a question from a member. He wanted to know how the trade made money and why he had to exit the trade to get his profit. The answer to the second part of the question is because the butterfly is a debit trade and so you pay for the trade. As the trade makes money, the debit or value of the spread increase and when you sell it, you get back more than what you paid. Hopefully. If you do nothing, you risk getting assigned on the short options.
How the trade works as well as short explainations of the iron butterfly and split strike butterfly as shown as well. The butterfly in the video was an OptionGenius trade that resulted in a 20% profit. As you can see, the butterfly can and does give off [...]