Butterfly Spread Calculator
Calculate max profit, max loss, breakeven points, and return on risk for a long call butterfly spread. Enter three equidistant strikes and the premium for each leg to see the full risk profile at expiration.
Enter three equidistant strikes and the premium paid/received for each leg of the butterfly.
Enter your butterfly spread strikes and premiums, then click Calculate Butterfly Spread to see max profit, max loss, breakevens, and return on risk.
For educational purposes only. Not financial advice. Read full disclaimer
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Butterfly Spread Formulas
Net Debit = Lower Premium - 2 x Middle Premium + Upper Premium
Max Profit = (Middle Strike - Lower Strike - Net Debit) x 100 x Contracts
Max Loss = Net Debit x 100 x Contracts
Breakeven Lower = Lower Strike + Net Debit
Breakeven Upper = Upper Strike - Net Debit
Return on Risk = (Max Profit / Max Loss) x 100
Worked Examples
Example 1: AAPL Long Call Butterfly
AAPL is trading at $200. You buy the 195 call for $7.50, sell two 200 calls at $4.50 each, and buy the 205 call for $2.50. 1 contract.
- Net Debit = $7.50 - 2 x $4.50 + $2.50 = $1.00 per share ($100 per contract)
- Max Profit = ($200 - $195 - $1.00) x 100 = $400
- Max Loss = $1.00 x 100 = $100
- Breakeven Lower = $195 + $1.00 = $196.00
- Breakeven Upper = $205 - $1.00 = $204.00
- Return on Risk = $400 / $100 x 100 = 400.0%
Example 2: SPY Butterfly with 5 Contracts
SPY is trading at $450. You buy the 445 call for $8.00, sell two 450 calls at $5.00 each, and buy the 455 call for $3.00. 5 contracts.
- Net Debit = $8.00 - 2 x $5.00 + $3.00 = $1.00 per share ($500 total for 5 contracts)
- Max Profit = ($450 - $445 - $1.00) x 100 x 5 = $2,000
- Max Loss = $1.00 x 100 x 5 = $500
- Breakeven Lower = $445 + $1.00 = $446.00
- Breakeven Upper = $455 - $1.00 = $454.00
- Return on Risk = $2,000 / $500 x 100 = 400.0%
How to Use This Calculator
- Enter the lower strike — the lowest call you buy, providing the lower wing of the butterfly.
- Enter the middle strike — the strike of the two calls you sell. This is your target price at expiration.
- Enter the upper strike — the highest call you buy, providing the upper wing. It must be equidistant from the middle as the lower strike.
- Enter premiums for each leg — the cost per share for each option. The lower call is the most expensive, middle calls are sold, and the upper call is cheapest.
- Set the number of contracts — each contract covers 100 shares. The calculator scales all dollar amounts accordingly.
- Click Calculate — review max profit, max loss, both breakeven points, and the return on risk percentage.
Frequently Asked Questions
- What is a butterfly spread?
- A butterfly spread is a neutral options strategy that combines a bull spread and a bear spread using three equidistant strike prices. In a long call butterfly, you buy one lower strike call, sell two middle strike calls, and buy one upper strike call. The strategy profits most when the underlying expires exactly at the middle strike.
- When should you trade a butterfly spread?
- Butterfly spreads work best when you expect the underlying to stay near a specific price through expiration. They are ideal in low-volatility environments where large price moves are unlikely. Many traders use butterflies around earnings when they believe implied volatility is overstating the expected move.
- Why must the strikes be equidistant?
- Equidistant strikes ensure the payoff diagram is symmetric around the middle strike. If the wings are unequal, the position becomes a broken-wing butterfly with a different risk profile — the max loss differs on each side, and the trade may have a net credit or a skewed breakeven range.
- What is the maximum loss on a butterfly spread?
- The maximum loss on a long butterfly spread equals the net debit paid to enter the trade. This occurs when the underlying expires at or below the lower strike, or at or above the upper strike. Because the cost is typically small relative to the potential profit, butterflies offer high reward-to-risk ratios.
- Can you build a butterfly with puts instead of calls?
- Yes. A long put butterfly uses the same structure with puts: buy one lower strike put, sell two middle strike puts, and buy one upper strike put. At expiration, the payoff is identical to a call butterfly at the same strikes. The choice between calls and puts usually depends on liquidity and pricing efficiency.