A cheap, defined bet that the stock lands on a specific price.
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P&L at the selected date, priced with Black–Scholes. At 0 DTE the curve is pure intrinsic value. A tool, not a recommendation.
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What a Long Butterfly is
Structure: Long 1 lower call, short 2 middle calls, long 1 upper call — equal spacing, same expiry. Bought for a debit.
A long butterfly (a "long call butterfly") is three strikes, four contracts, one small debit. The short position in the middle pays for most of the wings, so the trade costs far less than the move it targets — and its maximum gain is fixed at the middle strike.
The payoff is a tent: two slopes meeting at the middle strike, with flat ground outside. It is a precision trade with a very high reward-to-risk ratio and a low probability of landing exactly right, which is why the probability tool matters as much as the payoff here.
The numbers
Max profit
distance between adjacent strikes − debit paid
Max loss
the debit paid, outside the wing strikes
Breakeven
lower strike + debit · upper strike − debit
These are at-expiration formulas. The chart above prices the structure at the selected date with Black–Scholes — at 0 DTE the curve is pure intrinsic value. A tool, not a recommendation.
When traders use it
You have a specific price target and a date you expect it by.
You want defined risk with a large payoff if the pin lands.
You expect volatility to fall while the stock settles into a level.
What works against it
The profitable zone is narrow and the maximum needs the exact strike at expiration.
It is a low-probability trade by construction — the cheap debit is the market pricing that in.
Two short contracts in the middle mean assignment risk if the stock finishes at the middle strike.
Long Butterfly questions
What is the max gain on a long butterfly?
The spacing between adjacent strikes minus the debit. With $5 spacing and a $0.60 debit the maximum is $4.40 per butterfly, and it occurs only if the stock finishes exactly at the middle strike.
Why is the butterfly so cheap?
Because you sell two contracts at the middle strike, and that credit pays for most of the two wings. The cheapness is the compensation for a narrow target.
Where are the breakevens?
The lower strike plus the debit, and the upper strike minus the debit. Outside those prices the position loses the whole debit.
What is the difference between a butterfly and an iron butterfly?
The butterfly is all calls (or all puts) and is bought for a debit. The iron butterfly mixes puts and calls, is sold for a credit, and has a wider risk profile because the middle is a short straddle.
If it goes against you: common mitigations
Every entry below is a response traders commonly plan before entry, with what it actually costs. Which one is right depends on why you entered and what you now expect — that is a judgement the calculator cannot make for you, and none of this is advice.
Roll the wings to the new price
Close the structure and reopen it centred on where the stock actually is.
Pros: Re-aims the target at a realistic pin and can sometimes be done for a similar cost.
Cons: The first debit is spent, and the new position needs a fresh period of stillness.
Consider when: The stock moved to a different, credible level and time remains before expiry.
Close early near the body
Exit while the stock is trading at the middle strike rather than waiting for expiration.
Pros: Locks in a result without exposure to the final hours and assignment on the short contracts.
Cons: You leave the last part of the curve on the table and pay to exit a package that can be thinly quoted.
Consider when: The stock is sitting on the body strike with little time left.
Buy back one wing into a spread
Purchase one of the outer options to close it, leaving a two-leg spread.
Pros: Keeps a directional position with a wider profitable range than the butterfly.
Cons: Immediately reduces the maximum and adds cost to a position that is already losing.
Consider when: You no longer expect a pin and would rather hold a directional view.
Accept the small total loss
Let it expire worthless outside the wings.
Pros: The loss is limited to the debit, which was small by design, and nothing more is spent.
Cons: The debit is gone entirely and the trade has to be replaced from scratch.
Consider when: The stock is well outside the wings and there is no time for it to return.