Like a butterfly but with a wider profit zone. Uses four different strikes to create a wider range of profitability. Maximum profit when the stock expires between the two middle strikes.
Middle strike spread width - Net premium paid
Net premium paid
Lowest strike + Net premium AND Highest strike - Net premium
Long 1 lowest Call + Short 1 lower-middle Call + Short 1 upper-middle Call + Long 1 highest Call
Limited profit, limited risk. Wider profit zone than butterfly but lower max profit.
When you expect the stock to trade within a range but want more room than a butterfly. When you want low-cost, defined-risk neutral positioning.