Maximum income value (net commission) = (sell 1 commission+sell 2 commission) -2 * buy commission.
Maximum risk value = intermediate execution price-low execution price-maximum return value
The maximum profit and loss formula of butterfly arbitrage is:
Maximum loss = sum of premiums charged for selling options-sum of premiums paid for buying options, that is, sum of revenue and expenditure of option fees.
Maximum profit = {(highest bargaining-lowest bargaining)-maximum loss }/2
Extended data:
1, butterfly arbitrage is essentially the arbitrage of the same commodity across delivery months;
2. Butterfly arbitrage consists of two intertemporal arbitrages with opposite directions;
3. The bond between two intertemporal arbitrage is the futures contract in the middle month, and the quantity is the sum of the two ends;
4. Butterfly arbitrage must issue three trading orders at the same time.
5. Compared with ordinary intertemporal arbitrage, butterfly arbitrage is theoretically less risky and profitable. (Forward intertemporal arbitrage can be risk-free)
Baidu encyclopedia-butterfly arbitrage