Long Put Butterfly
Description
The put-only equivalent of the long call butterfly: buying one put below, selling two puts at, and buying one put above a target strike.
Setup
- Buy one put at a lower strike.
- Sell two puts at a middle strike.
- Buy one put at a higher strike, evenly spaced from the middle.
Context
Used when the underlying is expected to sit near a specific level through expiry; economically equivalent to the call version, built with puts instead.
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 | Put | 1 | $84000.0000 | 24 Sep 2026 | $113.9326 | $126.5918 | $14.2416 |
| Short | Put | 2 | $84500.0000 | 24 Sep 2026 | $308.0401 | $278.5020 | $50.6367 |
| Long | Put | 1 | $85000.0000 | 24 Sep 2026 | $717.3536 | $928.3399 | $25.3184 |
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 | -$215.2061 | -100.0% |
| $84000.0000 | $0.0000 | -$215.2061 | -100.0% |
| $84215.2061 breakeven | $215.2061 | $0.0000 | +0.0% |
| $84394.5400 current | $394.5400 | $179.3339 | +83.3% |
| $84500.0000 | $500.0000 | $284.7939 | +132.3% |
| $84784.7939 breakeven | $215.2061 | $0.0000 | +0.0% |
| $85000.0000 | $0.0000 | -$215.2061 | -100.0% |
| $86000.0000 | $0.0000 | -$215.2061 | -100.0% |