Home > Articles > Volume 42 (2024) > Chapter 1 (January 2024) > Stocks & Commodities V. 42:01 (18–19, 21): Newton’s Cradle And The Short Butterfly by John A. Sarkett

Stocks & Commodities V. 42:01 (18–19, 21): Newton’s Cradle And The Short Butterfly by John A. Sarkett

Stocks & Commodities V. 42:01 (18–19, 21): Newton’s Cradle And The Short Butterfly by John A. Sarkett
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Newton’s Cradle And The Short Butterfly by John A. Sarkett

In option trading, a “Newton’s cradle” is an offsetting debit spread position. Here is a look at this type of trade and why it is used.

One type of option trade that is never taught or even mentioned in trading circles or seminars is the short butterfly. Sell a $5 butterfly for a $1 credit? And take on $4 of risk? No way. Who in their right mind would do that ...




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