A butterfly variant using three strikes in a 1-3-2 pattern, which shifts the profit tent directionally while keeping the cost low.
A call Christmas tree buys one call at a lower strike, sells three at a middle strike, and buys two at a higher strike. The uneven ratios push the peak of the payoff away from the centre, so the structure leans bullish or bearish rather than betting on a pin.
It is a niche structure, favoured by traders who want a long-butterfly payoff skewed toward a target price. The costs of the extra legs are real: six contracts of bid-ask-spread each way, and a risk-graph that is genuinely hard to read without software.
Example: XYZ at $50. Buy one $50 call, sell three $55 calls, buy two $57.50 calls for a small debit. The peak sits at $55, the risk is bounded by the two long upper calls, and the whole thing costs less than an equivalent butterfly centred at $55.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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