Strategy lesson · Advanced · neutral
Call Butterfly Explained
Long call butterfly: buy 1 low strike, sell 2 middle, buy 1 high — limited risk, max profit if price lands near the body at expiry.
How a Call Butterfly is built
1× long K1 call, 2× short K2 call, 1× long K3 call (equal spacing classic).
- Leg 1: buy call · strike template 90 · premium ~12 · 1 contract(s)
- Leg 2: sell call · strike template 100 · premium ~5.5 · 2 contract(s)
- Leg 3: buy call · strike template 110 · premium ~2 · 1 contract(s)
Risk & reward snapshot
| Market bias | neutral |
|---|---|
| Max profit | Middle spacing − net debit (if price at body). |
| Max loss | Net debit paid. |
| Breakeven | Two breakevens around the body. |
Figures are conceptual for the classic structure. Your actual premiums, strikes, and fees change the numbers — confirm on the calculator.
When traders use it
- Low-cost bet on a precise price region (often around expected pin).
Key risks
- Low probability of max profit; easy to lose the full debit if price misses the window.
Practical tips
- Commissions and wide markets matter more on multi-leg cheap debit flies.
Practice on the calculator
- Open the Call Butterfly calculator.
- Load a symbol and option chain; fill realistic mid premiums.
- Review max profit, max loss, breakevens, and the date × price heatmap.
- Change strikes and DTE to see how risk shape shifts.
FAQ
What is a Call Butterfly?
Long call butterfly: buy 1 low strike, sell 2 middle, buy 1 high — limited risk, max profit if price lands near the body at expiry.
What is the max loss on a Call Butterfly?
Net debit paid.
When should I use a Call Butterfly?
Low-cost bet on a precise price region (often around expected pin).