Put Butterfly Options Strategy Guide
By OptionClaws, VirWare LLC · Updated 2026-08-23
A long put butterfly buys one put at a higher strike, sells two puts at a middle strike, and buys one put at a lower strike, equally spaced, in one expiration. It costs a small debit and pays the wing width minus the debit if the stock closes at the middle strike at expiration, with the loss capped at the debit outside the breakevens. Built with puts, the butterfly is most often centered below the current price, which makes it a low-cost way to target a pullback to a specific level while keeping the short options out of the money until then.
Key takeaways
- Buy one put, sell two at a lower strike, buy one at a lower strike still, equally spaced
- Small debit; max profit of wing width minus debit if the stock closes at the middle strike
- Max loss is the debit; breakevens are upper strike minus debit and lower strike plus debit
- Usually placed below the stock, so it doubles as a cheap, targeted bearish bet
When it makes sense
- You expect the stock to drift down to a support level and stall there into expiration
- You want a cheap, defined-risk trade with a payout several times the cost
- Implied volatility is elevated, lowering the cost of the structure
- You are targeting a level below the stock and want the short strikes out of the money for now
How it works
Buy one put at strike C (highest), sell two puts at strike B, buy one put at strike A (lowest), with C minus B equal to B minus A. The net debit is the maximum loss. At expiration: above C all puts expire worthless and you lose the debit; at B the long C put is worth the wing width and the rest are worthless, so the profit is width minus debit; below A the long and short puts offset and you lose the debit. Upper breakeven is C minus the debit; lower breakeven is A plus the debit. The expiration payoff is identical to a call butterfly at the same strikes.
Risk and reward
Maximum loss: the debit, if the stock finishes above C or below A. Maximum profit: (wing width minus debit) times 100 at B exactly. Breakevens: C minus debit and A plus debit. The usual outcome is a partial gain inside the breakevens or a total loss of a small debit outside them. A broken-wing put butterfly widens the lower wing, often for a credit: no loss if the stock rallies away, a larger loss equal to the difference in wing widths minus the credit if it crashes through the lower strikes.
Greeks and volatility
Below the center the position has positive delta (it wants the stock to come back up to B); above it, negative delta. Theta is negative while the stock is far from B and positive once it is near, so the trade rewards being right about the level in the last week. Vega is small and net negative near the center, positive at the wings. Because puts carry higher implied volatility than calls at strikes below the stock, put butterflies placed below the market are sometimes cheaper than the equivalent call structure despite identical payoffs.
Managing the trade
Plan to close on or just before expiration day when the stock is near B; letting it settle risks assignment on the two short puts with the long puts exercised against them, which can leave a residual stock position. Early assignment on the short middle puts is possible once they are deep in the money with little time value; if it happens you are long 200 shares, hedged by the long C put, and the lower long put. Close the whole spread as one order. If the stock falls through B early, the position is ahead of schedule and can usually be sold for a good share of its maximum.
Worked example
Stock at $80. Buy the 25-day $85 put, sell two $80 puts, buy the $75 put, for a $1.10 debit ($110). Maximum profit is ($5.00 minus $1.10) times 100 = $390 if the stock closes at exactly $80, a 355% return. Breakevens are $83.90 and $76.10. At $78 the spread is worth $3.00 and you make $190. Above $85 or below $75 you lose the full $110.
What to screen for
Screen put butterflies by small net debit, high return on risk at the center, short days to expiration, and the distance from the stock to the middle strike in percent or ATRs. High implied volatility rank lowers the cost. Require open interest at all three strikes, since lower strikes on less liquid names can be thin.
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Frequently asked questions
- What is the difference between a put butterfly and a call butterfly?
- At the same strikes and expiration they have identical expiration payoffs. Put butterflies are typically used when the strikes sit below the stock, so the short middle puts start out of the money; call butterflies when the strikes sit above it.
- What is the maximum loss on a put butterfly?
- The debit paid, lost if the stock finishes above the highest strike or below the lowest strike at expiration.
- What are the breakevens?
- The highest strike minus the debit and the lowest strike plus the debit. An 85/80/75 put butterfly bought for $1.10 breaks even at $83.90 and $76.10.
- Can I use a put butterfly as a hedge?
- As a cheap partial hedge, yes: it pays best if the stock falls to a specific level. It does not protect against a crash far below the lowest strike, where the payoff returns to zero.
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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.