Butterfly warrants refer to buying and selling two put warrants with different prices at the same time or buying and selling two warrants with different prices at the same time .
Such a combination can enable investors to obtain a certain income when the stock price fluctuates within a certain range. If the price fluctuation exceeds the range, investors will not suffer losses. The shape of the income curve is like “∧“, because its shape is like spreading wings. Flying butterflies, so it is named butterfly warrants.
In butterfly warrants, whether the underlying stock price rises or falls, it will always be beneficial to one of the warrants. If the warrant is close to expiry, the time value of the warrant is nearly exhausted, the premium rate is low, and the leverage magnification rises to a higher level; at the same time, the underlying stock price happens to be near the strike price, and the volatility of the underlying stock is greater. The greater the increase in warrants, may form a situation where two warrants are one after another, bringing many opportunities for investors to make huge profits.