Options Education

Long Put Butterfly Option Strategy

Snapshot
Legs
Buy 1 Low Put + Sell 2 Middle Puts + Buy 1 High Put
Outlook
Neutral / Target price at middle strike
Max profit
Width between middle and lower strike minus net debit paid
Max Loss
Net debit paid

A long put butterfly option strategy consists of buying one low-strike put, selling two middle-strike puts, and buying one high-strike put with identical expiration dates. The middle strike price sits directly midway between the upper and lower strikes. Establishing this position requires paying a net debit upfront. Investors use it when they forecast that the stock price will close near the middle strike price at expiration.

Your maximum profit is achieved if the stock closes exactly at the middle strike price when the options expire, equal to the distance between adjacent strikes minus the upfront cost. Your maximum loss is strictly limited to the net debit paid, occurring if the stock price closes below the lowest strike or above the highest strike.

Example
Stock
$100
Trade
  • Buy $95 Put for $1.00
  • Sell two $100 Puts for $3.00 each
  • Buy $105 Put for $6.00
→ $1.00 debit ($100)
Breakevens
$96.00 / $104.00
Outcomes
  • Stock at $100: +$400 Max Profit
  • Stock at $96 or $104: $0 Breakeven
  • Stock ≤ $95 or ≥ $105: -$100 Max Loss
Profit & loss at expiration Profit 0 Loss Stock Price → Peak at Middle Strike Max Loss Max Loss
Peak profit sits at the middle strike. Outside the wings, the loss is capped at the net debit paid.