Put butterfly
Buy 1 OTM put, sell 2 ATM puts, buy 1 ITM put for a low-cost pin trade.
A put butterfly is the mirror of a call butterfly , a three-strike, four-contract neutral strategy built entirely from puts. You buy 1 upper-strike put, sell 2 middle-strike puts, and buy 1 lower-strike put, all with the same expiration and equally spaced strikes. The payoff is identical to a call butterfly at the same strikes; traders choose between them based on bid/ask liquidity.
Bias: Neutral with a precise price target Risk profile: Defined risk (net debit), defined max profit (wing width − debit) Ideal conditions: Low expected movement, a specific pin target, low IV environment
How it's constructed
- Buy 1 put at strike C (upper)
- Sell 2 puts at strike B (middle , your target price)
- Buy 1 put at strike A (lower)
- Strikes equally spaced: C − B = B − A
- Net cost: Small debit
Setup example
QQQ trades at $400 and you think it pins near $400 in 30 days. You construct a 390 / 400 / 410 put butterfly:
- Buy 1 $410 put for $12
- Sell 2 $400 puts for $6 each ($12 total)
- Buy 1 $390 put for $2
- Net debit: $2 per share ($200 per butterfly)
Max profit at $400: $1,000 − $200 = $800 Breakevens: $392 and $408 Max loss: $200 outside the wings
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 |
Put butterfly vs call butterfly
The payoff at expiration is identical to a call butterfly at the same three strikes. So why two versions?
- Liquidity: OTM puts often trade with tighter spreads on equity indices (put skew is bid up by hedgers). A put butterfly above-the-money may fill at a better net debit than a call butterfly at the same strikes.
- Assignment risk: Put butterflies have early-assignment risk on the short puts if they go deep ITM near ex-dividend dates. Call butterflies have the equivalent risk on calls.
- Margin: Brokers treat both identically.
In practice, build whichever side has the better fill , the economics are the same.
When to use a put butterfly
Best conditions:
- Specific price target, narrow window
- Low IV (debit strategy)
- 30 to 45 DTE
- OTM puts on the chain offer tighter spreads than equivalent calls
Related terms: Call butterfly, iron butterfly, broken-wing butterfly, pin risk, debit spread
Try it on Stryke: Use the Options Strategy Builder to compare call and put butterfly fills side by side.
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