Spring is the Time for Butterfly Spreads

While big trades are common in Nasdaq 100 unit trust (QQQ Quote) options , there was one huge transaction earlier this week that grabbed some traders' attention.

On Wednesday afternoon, a major investment bank executed a butterfly spread in QQQ options, buying 50,000 April 55 calls and 50,000 April 69 calls and selling 100,000 April 62 calls. The QQQ traded in a range from $48.97 to $50.43 and closed at $49.42 on Wednesday, the day the butterfly trade took place.

What the heck is a butterfly spread? And why the heck should you ever use one? ...