Long Butterfly Option Strategy Risk-Reward Calculator

Defined Risk-Reward Ratio · Pinpoint Target Profit · Net Debit Math

Calculate exact net debit paid, maximum target profit, risk-reward ratio, and breakevens for Long Butterfly option spreads.

✓ High Risk:Reward Ratio ✓ Defined Max Risk

🦋 Butterfly Strike & Premium Details

Maximum Target Profit

₹—

Risk : Reward Ratio: 1 : —

Butterfly Metrics Breakdown

Max Risk (Net Debit Paid)—
Lower Breakeven Price—
Upper Breakeven Price—
Pinpoint Target Strike —

Long Butterfly Option Strategy Guide

Butterfly Strategy Anatomy

A Long Call Butterfly consists of: 1. Buy 1 ITM Call (Lower Strike). 2. Sell 2 ATM Calls (Middle Strike). 3. Buy 1 OTM Call (Upper Strike). All legs use the same expiration date.

Exceptional Risk-Reward Profiles

Long Butterfly spreads are beloved for their asymmetric payouts. Risk is strictly limited to the small net debit paid, while upside potential can be 3x to 6x the risk amount!

💡 Pro Hack: Low Debit Entry

Aim to enter Butterfly spreads when net debit is 20% or less of the wing width (e.g. paying ₹35 for a 200-point wing width) for a 1:4.7 risk-reward ratio.

⚡ Expiration Week Acceleration

Butterfly spreads gain the most value in the final 5-7 days before expiration as time decay rapidly erodes the two short middle options.

🛡️ Broken Wing Butterfly Variation

In a Broken Wing Butterfly, you widen one of the outer wings to eliminate risk on one side entirely, creating a zero-cost or credit trade.

⚠️ 3 Common Butterfly Spread Mistakes

  • • Expecting 100% Max Profit: Pinpointing the exact middle strike at 3:30 PM on expiry is rare. Take profits when the trade reaches 50%-70% of max profit.
  • • Overpaying on Net Debit: Paying a high net debit (>35% of wing width) ruins the asymmetric risk-reward advantage.
  • • Ignoring Bid-Ask Spreads: Executing 4 legs in illiquid stock options can cause severe slippage loss. Always trade high-volume Nifty/BankNifty options.

Frequently Asked Questions

What is a Long Butterfly Option Strategy?
A Long Butterfly is a neutral, defined-risk option strategy combining a Bull Spread and a Bear Spread. It involves buying 1 ITM option, selling 2 ATM options, and buying 1 OTM option.
How is Maximum Profit calculated for a Long Butterfly?
Maximum Profit = (Middle Strike - Lower Strike - Net Debit Paid) × Lot Size. Peak profit occurs when the spot price closes exactly at the middle strike price at expiration.
What is the Maximum Risk / Loss of a Long Butterfly?
Maximum Loss = Net Debit Premium Paid × Lot Size. If the spot price closes far above or far below the outer strikes, you lose only the net debit paid.
What are the breakeven points for a Long Call Butterfly?
1. Lower Breakeven = Lower Strike + Net Debit Paid per unit.
2. Upper Breakeven = Upper Strike - Net Debit Paid per unit.
Why do option traders like Butterfly spreads?
Long Butterfly spreads offer exceptional Risk-Reward ratios (often 1:3 to 1:5)—meaning you risk a small amount of net debit to potentially gain 3x to 5x your risk.
When should I enter a Long Butterfly spread?
Enter Long Butterfly spreads when Implied Volatility is moderate to high, expecting the underlying asset (Nifty/BankNifty) to consolidate within a tight price range near the middle strike.
What is the difference between Call Butterfly and Put Butterfly?
Both Call Butterfly and Put Butterfly have identical payoff diagrams and risk-reward profiles. The choice depends on option liquidity and pricing skew.
How does Theta (Time Decay) affect a Long Butterfly?
As expiration approaches, time decay works in your favor as long as the spot price stays near the middle strike, causing the two short middle options to lose value faster than the outer long options.

Related Options & Trading Calculators

Iron Condor PnL

4-leg option strategy

Straddle / Strangle

Volatility breakevens

Option IV Rank (IVR)

Volatility rank & percentile

Option Payoff Visualizer

Multi-leg option P&L