Long Call Butterfly
Description
Buying one call below, selling two calls at, and buying one call above a target strike, all the same expiry, to profit from the underlying pinning near that strike.
Setup
- Buy one call at a lower strike.
- Sell two calls at a middle strike.
- Buy one call at a higher strike, evenly spaced from the middle.
Context
Used when the underlying is expected to sit near a specific level through expiry, such as after a move has already played out.
Risk Profile
Maximum loss is the small net debit paid, at either extreme. Maximum gain is the width between adjacent strikes minus that debit, at the middle strike.
Pros
- Very low cost relative to the potential payout.
- Small, defined maximum loss.
- High reward-to-risk ratio if the pin plays out.
Cons
- Needs the underlying to land in a fairly narrow zone.
- Gains evaporate quickly if the underlying drifts away from the middle strike.
Effect of Time
Time decay generally helps as expiry nears, so long as the underlying stays close to the middle strike.
Effect of Volatility
A rise in implied volatility tends to hurt the position, since it makes a big move away from the middle strike more likely.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Long | Call | 1 | $84000.0000 | 24 Sep 2026 | $527.5262 | $590.8294 | $25.3213 |
| Short | Call | 2 | $84500.0000 | 24 Sep 2026 | $211.0101 | $185.6889 | $50.6424 |
| Long | Call | 1 | $85000.0000 | 24 Sep 2026 | $75.9636 | $92.8445 | $9.4955 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $83000.0000 | $0.0000 | -$181.4696 | -100.0% |
| $84000.0000 | $0.0000 | -$181.4696 | -100.0% |
| $84181.4696 breakeven | $181.4696 | $0.0000 | +0.0% |
| $84404.0500 current | $404.0500 | $222.5804 | +122.7% |
| $84500.0000 | $500.0000 | $318.5304 | +175.5% |
| $84818.5304 breakeven | $181.4696 | $0.0000 | +0.0% |
| $85000.0000 | $0.0000 | -$181.4696 | -100.0% |
| $86000.0000 | $0.0000 | -$181.4696 | -100.0% |