Butterfly Spread (100 Shares)

What is a Butterfly Spread?

A Butterfly Spread is a neutral options strategy that is profitable when the stock price stays near the middle strike price. You can execute a Butterfly Spread using either call options or put options, but you must use the same type for the entire spread (all calls or all puts).

How Payoff Works (Calls):

If you use call options, the Butterfly Spread profits when the stock price is close to the middle strike price. If the stock price goes too high or too low, your losses are limited to the net debit (cost) of the spread.

How Payoff Works (Puts):

If you use put options, the Butterfly Spread profits when the stock price is close to the middle strike price. If the stock price moves too far above or below the middle strike price, your losses are limited to the net debit (cost).

Example Payoff Scenarios for Calls: