Call butterfly
Buy 1 ITM call, sell 2 ATM calls, buy 1 OTM call for a low-cost pin trade.
A call butterfly is a three-strike, four-contract neutral strategy built entirely from call options. You buy 1 lower-strike call, sell 2 middle-strike calls, and buy 1 upper-strike call , all with the same expiration. The strikes are equally spaced. Max profit occurs if the stock pins exactly at the middle strike at expiration.
Bias: Neutral with a precise price target Risk profile: Defined risk (net debit paid), defined max profit (wing width − debit) Ideal conditions: Low expected movement, a specific price target you believe the stock will pin, low IV (debit strategies benefit from rising IV)
How it's constructed
- Buy 1 call at strike A (lower)
- Sell 2 calls at strike B (middle , your target price)
- Buy 1 call at strike C (upper)
- Strikes are equally spaced: B − A = C − B
- Net cost: Small debit
Setup example
SPY trades at $450 and you think it will pin near $450 in 30 days. You construct a 440 / 450 / 460 call butterfly:
- Buy 1 $440 call for $12
- Sell 2 $450 calls for $6 each ($12 total)
- Buy 1 $460 call for $2
- Net debit: $12 − $12 + $2 = $2 per share ($200 per butterfly)
Max profit at $450: $1,000 (wing width $10 × 100) − $200 debit = $800 Breakevens: $442 and $458 Max loss: $200 if SPY < $440 or > $460
Max profit, max loss
| Metric | Value |
|---|---|
| Max profit | (Wing width × 100) − net debit |
| Max loss | Net debit paid |
| Breakevens | Lower strike + debit AND upper strike − debit |
| Best at expiry | Middle strike exactly |
When to use a call butterfly
Best conditions:
- You have a specific price target and a narrow time window
- IV is low (butterflies are debit strategies; rising IV helps the long wings)
- 30 to 45 DTE so theta starts working in your favor near expiration
- Pinning candidates: index ETFs, mega-caps, stocks near round-number resistance
Call butterfly vs iron butterfly
| Call butterfly | Iron butterfly | |
|---|---|---|
| Construction | All calls | Calls and puts |
| Trade type | Debit | Credit |
| Max profit | Wing width − debit | Net credit |
| Max loss | Debit paid | Wing width − credit |
| Best when | IV is rising | IV is falling |
A call butterfly is the debit version. Choose it when IV is low and likely to rise; choose an iron butterfly when IV is high and likely to fall.
Related terms: Iron butterfly, broken-wing butterfly, pin risk, neutral strategy, debit spread
Try it on Stryke: Use the Options Strategy Builder to construct and screen butterfly spreads.
Try this with Stryke
Apply what you learned with live data on Stryke.