| Traders use the butterfly strategy when they feel a particular stock will remain neutral during a certain period. By entering into a butterfly trade, the trader is essentially betting that the underlying stock price will remain close to where it is currently. It involves, in one single transaction, the simultaneous purchase of a call at one exercise price, the sale of two calls at a higher exercise price, close to the expected stock price, and the purchase of a call at an equally higher exercise price.
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