The Reverse Butterfly is a market-neutral options strategy designed to benefit from increased volatility. It involves buying an at-the-money call and put while selling out-of-the-money options to offset costs.
The strategy has a limited risk and reward profile, with maximum profit achieved when the stock price moves significantly beyond the breakeven points. It’s ideal for traders expecting significant market movement but carries the risk of time decay and requires careful management of implied volatility.
