Call Butterfly Calculator

A call butterfly buys one call, sells two calls at a higher strike, and buys another call above that, with equal spacing between strikes, all on the same expiry. It costs a small debit and pays the most if the stock finishes exactly at the middle strike at expiry, where the lower call is worth the spacing and the others expire worthless.

When it is used

Butterflies are a cheap way to target a price. A trader who expects a stock to drift to a level by a date can buy a butterfly centred there for a small cost and a large potential multiple. They are also sold short of expiry on positions that have run their course, and used around expected pin levels on expiry day.

How it makes and loses money

The profit comes from time decay once the stock is near the middle strike late in the trade. Earlier the position barely moves: the three legs offset each other and the butterfly is worth close to what it cost until the final week or two. The loss is capped at the debit on both sides.

What to check in the grid

A butterfly is the clearest example of a position that only exists at expiry. Compare the row at the middle strike in the final column with the same row three weeks earlier; the early value is a small fraction of the peak. That is the trade-off for the low cost.