advancedLow RiskNeutral / Pinpoint Target
Butterfly Spread
A low-cost, high-reward bet that the stock pins to a specific price at expiration.
What is a Butterfly Spread?
A butterfly uses three strikes: buy 1 lower, sell 2 middle, buy 1 upper (all same expiration). You pay a small debit for a potentially large payout if the stock lands near the middle strike at expiration. Risk is limited to the debit paid.
When to use it
Use when you have a very specific price target and want to bet on low movement. Great for earnings plays when you expect a muted reaction, or for targeting a technical level.
Structure
Buy 1 lower-strike call + sell 2 middle-strike calls + buy 1 upper-strike call. Equal spacing between strikes.
Key Metrics
Max Profit
(Wing width − debit paid) × 100, achieved if stock closes exactly at the middle strike.
Max Loss
Net debit paid × 100.
Breakeven
Lower strike + debit paid (lower) and upper strike − debit paid (upper).
Greeks Profile
Theta: positive near middle strike. Delta: near zero if centered ATM. Vega: negative (lower IV increases value near expiration). Gamma: negative near middle strike.
Tips & Best Practices
- 1Center the butterfly on your price target, not the current price.
- 2Close early at 50–80% of max profit — don't hold to expiration.
- 3Wider wings = higher cost but more room for profit.
- 4Broken-wing butterflies can be done for a credit by using unequal widths.
See it in action
Model a Butterfly Spread with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Butterfly Spread Calculator →