Neutral options strategy
Call butterfly
Buy one call below, sell two at the target, buy one above. A cheap bet that the stock ends near a specific price.
NeutralAny IVDefined riskLevel 5 · Advanced structures
Call butterfly payoff
An example on a $100 stock with 30% implied volatility. The dashed line is the profit or loss at expiry; the solid line is what the position is worth today.
The trade
Buy 1 $95 call · 30 days · $6.65
Sell 2 $100 call · 30 days · $3.59
Buy 1 $105 call · 30 days · $1.66
Net debit $113
Max profit$387
Max loss−$113
Break-evens$96.13 · $103.87
Chance of profit35%
How it works
- Max loss = the small debit.
- Max profit at the middle strike: wing width − debit.
When to use it
- You have a precise price target for expiry.
Managing the trade
- Profits arrive mostly in the final week; take them when offered.
Risks
- Most butterflies expire with little value: low cost, low probability.