Title:
The Strategies of Butterfly Spread and Broken Wing Condor Spread in Managing Investment Risks in Gold Futures Contracts

Authors:
Donny Citra Lesmana*, Gregorius Adhitya Satrio, M. A. As-Shadiqi Chairahman, Aura Dwi Anggraeni, Nur Rahmadani Ahmad, Indonesia

Abstract:

This study examines option-based hedging strategies, Butterfly Spread and Broken Wing Condor Spread, for managing risk in gold futures contracts during 2024. Although gold futures are widely used for hedging, holding them without protection (unsecured) exposes investors to significant price risk. The research addresses this gap by evaluating both strategies through simulation using historical gold futures data and the Black-76 option pricing model. Results show that both strategies effectively limit potential losses compared to unsecured positions. The Broken Wing Condor Spread offers a higher probability of profit and greater flexibility under market uncertainty, despite a slightly lower maximum return than the Butterfly Spread. These findings provide a quantitative basis for selecting hedging strategies based on market expectations and individual risk tolerance. This study contributes to the existing literature by providing a probability-based comparison of option hedging strategies for gold futures using the Black-76 framework, offering practical insights for investors operating in low-to-moderate volatility environments.

DOI: https://doi.org/10.51505/IJEBMR.2025.91224