Call Butterfly Options Strategy Guide
By OptionClaws, VirWare LLC · Updated 2026-08-23
A long call butterfly buys one call at a lower strike, sells two calls at a middle strike, and buys one call at a higher strike, with the strikes equally spaced, all in one expiration. It costs a small debit and pays its maximum, the wing width minus the debit, if the stock closes exactly at the middle strike at expiration. The payoff shrinks to zero at the breakevens and the loss is capped at the debit outside them. Butterflies are pinning trades: cheap, low probability, and capable of returning several times their cost when the stock cooperates.
Key takeaways
- Buy one call, sell two at a higher strike, buy one at a higher strike still, all equally spaced
- Small debit, max profit at the middle strike of wing width minus debit
- Max loss is the debit; breakevens are lower strike plus debit and upper strike minus debit
- A precision bet that the stock finishes near a specific price
When it makes sense
- You have a specific price target for expiration and want a cheap, defined-risk way to play it
- You expect a stock to sit still, or to drift to a level and stop, into expiration
- Implied volatility is high, which makes butterflies cheaper relative to their maximum payout
- You want to risk a small, fixed amount for a multiple of it
How it works
Buy one call at strike A, sell two calls at strike B, buy one call at strike C, with B minus A equal to C minus B. The net debit is the maximum loss. At expiration: below A all calls expire worthless and you lose the debit; at B the long A call is worth the wing width and the others are worthless, so profit is width minus debit, the maximum; above C the position is worth zero again (the two short calls offset the two longs) and you lose the debit. Lower breakeven is A plus the debit; upper breakeven is C minus the debit. The same payoff can be built with puts, or as an iron butterfly (a put spread and a call spread sharing the middle strike) for a credit.
Risk and reward
Maximum loss: the debit, realized if the stock finishes below A or above C. Maximum profit: (wing width minus debit) times 100, only at B exactly. Breakevens: A plus debit and C minus debit. Returns on risk of 200 to 500% at the center are common, which is why the probability of collecting most of it is low; the realistic outcome is a partial profit if the stock lands inside the breakevens and a total loss of a small debit if it does not. A broken-wing butterfly makes one wing wider, usually for a credit: that removes the loss on the narrow-wing side but increases the loss on the wide side to the difference between the wing widths minus the credit.
Greeks and volatility
Delta depends on where the stock sits relative to the center: positive below B, negative above it, near zero at B. Theta is negative when the stock is far from B (the position is mostly long the wings) and positive when the stock is near B (the two short middle calls dominate), which is why butterflies gain fastest in the final days if the stock is at the center. Vega is negative near the center and positive at the wings, but small overall; the butterfly is principally a bet on where the stock finishes, not on volatility.
Managing the trade
Butterflies are best held into the last week, when the peak sharpens, and closed on expiration day rather than settled, because a stock near B at the close creates assignment on the short calls with the long calls exercised or not depending on the exact settle. Early assignment on the short middle calls is possible once they are in the money, especially before an ex-dividend date; it converts part of the position into short stock covered by the long lower call, which stays defined-risk but changes the margin. Closing the entire spread as one order avoids legging risk.
Worked example
Stock at $100. Buy the 20-day $95 call, sell two $100 calls, buy the $105 call, for a $1.20 debit ($120). Maximum profit is ($5.00 minus $1.20) times 100 = $380 if the stock closes at exactly $100, a 317% return. Breakevens are $96.20 and $103.80. At $102 the spread is worth $3.00 and you make $180. Below $95 or above $105 you lose the full $120.
What to screen for
Screen butterflies by net debit (small), return on risk at the center, days to expiration (short, since the peak only develops near expiration), and the distance from the stock to the middle strike. High implied volatility rank lowers the cost. Check liquidity carefully: four contracts across three strikes means the bid-ask spread can consume a large share of a small debit.
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Frequently asked questions
- What is the maximum profit on a call butterfly?
- The distance between adjacent strikes minus the debit, times 100, earned only if the stock closes exactly at the middle strike at expiration. Partial profit is earned anywhere between the breakevens.
- What are the breakevens on a butterfly?
- The lower strike plus the debit and the upper strike minus the debit. A 95/100/105 butterfly bought for $1.20 breaks even at $96.20 and $103.80.
- What is a broken-wing butterfly?
- A butterfly with one wing wider than the other, usually opened for a credit. It has no loss on the narrow-wing side but a larger loss on the wide side equal to the difference in wing widths minus the credit.
- Call butterfly or put butterfly?
- At the same strikes and expiration they have the same expiration payoff. Choose whichever is cheaper after the bid-ask spread, or use puts when the strikes are below the stock and calls when they are above it, so the short middle options are out of the money and assignment is less likely.
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Last updated 2026-08-23. Educational content, not investment advice. Options involve substantial risk and are not suitable for every investor. See our Terms of Service.