When Should You Use This Strategy?
Stock settles near middle
Who Benefits Most?
Conservative theta traders
Position Setup
The Long Put Butterfly consists of the following legs:
- Buy 1 110 strike put at $12 premium
- Sell 2 100 strike put at $6 premium
- Buy 1 90 strike put at $2 premium
Payoff at Expiration
The chart below shows profit and loss across a range of underlying prices for the default long put butterfly setup. Open the interactive calculator to change strikes, premiums, and quantities and see the shape update live.
How Profit and Loss Work
Maximum Profit: $800 per default position
Maximum Loss: $200 per default position
Break-even Points: $92 / $108
Timing & Time Horizon
30–45 days
Most traders enter this strategy 30–60 days before their expected move, allowing enough time for the position to develop while avoiding excessive time decay on shorter-dated options.
Capital Requirements
Modest net debit
How to Manage the Position
Close at 50–75% profit
- Monitor the position daily, especially as it approaches profitability
- Set clear profit targets and exit rules before entering
- Consider closing early to lock in gains rather than waiting for max profit
- Be prepared to cut losses if the thesis is wrong
Key Risks & What to Watch
- Precision needed for narrow zone
- Multiple legs costs
Common Variations
The default setup above is one version of the long put butterfly. Traders adjust strike placement to trade off cost, probability, and payout:
Wide-body put butterfly
Space the wing strikes further from the middle strike.
Key difference: Higher net debit and a wider (but lower-probability) profit zone.
Best for: Traders who want more room around their price target.
Broken-wing put butterfly
Set the wing strikes at unequal distances from the body, often eliminating the debit or creating a small credit.
Key difference: Removes risk on one side of the trade in exchange for asymmetric exposure on the other.
Best for: Traders who want a directional lean built into the low-cost butterfly structure.
Frequently Asked Questions
Why does a long put butterfly cost so little?
Setup
The two short puts at the middle strike collect enough premium to largely offset the two long puts at the outer strikes, leaving a small net debit and correspondingly capped, but low-cost, defined risk.
What's the ideal outcome for this trade?
When to Use
The stock finishes exactly at the middle (short) strike at expiration, maximizing the value of the long upper-strike put while the short puts and lower long put expire with minimal value.
How does this compare to a long call butterfly?
Comparisons
Both target the stock pinning near a central strike with nearly identical risk/reward shapes; the choice between calls and puts usually comes down to relative pricing and skew between the two.
Why is precision so important with this strategy?
Greeks & Risk
Because the profit zone is narrow and centered tightly around the middle strike, even a modest move away from the target price can erode most of the potential profit.
Model Before You Trade
Every strategy performs differently based on entry price, strike selection, and premium levels. Use the interactive Long Put Butterfly calculator to model the payoff with your expected entry, strikes, and premiums before committing capital.
Educational information only. This guide explains how the strategy works mathematically and typically behaves. It is not investment advice, and past performance does not guarantee future results. Options trading involves significant risk, including the potential loss of premium paid. Paper trade or use small positions while learning.