1. What it is
Long butterfly: buy the low and high strikes and sell twice as many at the middle strike, all calls or all puts, at one expiration. Equal wings create a symmetric tent.
2. Why use it
Use a 1:2:1 structure to target a central expiration price.
3. How the numbers work
SPY · Teaching example · Reference price $500
All option legs have the same expiration. Premiums are per share. Each standard contract represents 100 shares.
| Side | Option type | Strike | Quantity | Premium |
|---|---|---|---|---|
| Buy | Call | 470 | 1 | 30.5 |
| Sell | Call | 500 | 2 | 5 |
| Buy | Call | 530 | 1 | 0.5 |
- Net premium
- −30.5 × 1 + 5 × 2 − 0.5 × 1 = -$21.00 × 100 = -$2,100.00
- Maximum expiration profit
- $900.00
- Maximum expiration loss
- $2,100.00
- Expiration breakeven
- $491.00 / $509.00
Expiration scenarios
| Underlying at expiration | Profit / loss |
|---|---|
| 470 | -$2,100.00 |
| 491 | $0.00 |
| 500 | $900.00 |
| 509 | $0.00 |
| 530 | -$2,100.00 |
Illustrative prices, before fees. Expiration payoffs exclude early assignment and changes in time value or volatility. Editing strikes keeps the entered premiums; no market quotes are fetched.
Explore this example ↗4. How it changes
Near the center, a long butterfly can have positive theta and negative vega despite being bought for a debit. Greek signs vary near and outside the wings.
5. What to watch for
A long equal-wing butterfly risks the debit. Reversing the legs creates a short butterfly whose maximum loss is concentrated at the center.
Long describes owning the structure, not having positive gamma everywhere. Confirm the side setting and inspect the actual legs.