Short Put Butterfly
Description
The put-only equivalent of the short call butterfly: selling the wings and buying the body, profiting when the underlying moves away from the middle strike.
Setup
- Sell one put at a lower strike.
- Buy two puts at a middle strike.
- Sell one put at a higher strike, evenly spaced from the middle.
Context
Used when a large move away from the current level is expected but the direction is uncertain, while keeping the cost of entry small.
Risk Profile
Maximum gain is the small net credit received, at either extreme. Maximum loss is the width between adjacent strikes minus that credit, at the middle strike.
Pros
- Collects a credit up front.
- Defined, capped maximum loss.
- Profits from a move in either direction.
Cons
- Maximum gain is small relative to the width of the structure.
- Loses the most in the worst-case scenario of the underlying pinning at the middle strike.
Effect of Time
Time decay generally hurts the position as expiry nears, if the underlying sits close to the middle strike.
Effect of Volatility
A rise in implied volatility tends to help 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 |
|---|---|---|---|---|---|---|---|
| Short | Put | 1 | $84000.0000 | 24 Sep 2026 | $113.9455 | $101.2849 | $14.2432 |
| Long | Put | 2 | $84500.0000 | 24 Sep 2026 | $312.2955 | $337.6168 | $50.6425 |
| Short | Put | 1 | $85000.0000 | 24 Sep 2026 | $717.4344 | $506.4243 | $25.3212 |
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 | $206.7888 | +100.0% |
| $84000.0000 | $0.0000 | $206.7888 | +100.0% |
| $84206.7888 breakeven | -$206.7888 | $0.0000 | +0.0% |
| $84404.2000 current | -$404.2000 | -$197.4112 | -95.5% |
| $84500.0000 | -$500.0000 | -$293.2112 | -141.8% |
| $84793.2112 breakeven | -$206.7888 | $0.0000 | +0.0% |
| $85000.0000 | $0.0000 | $206.7888 | +100.0% |
| $86000.0000 | $0.0000 | $206.7888 | +100.0% |