Long Call Butterfly Strategy
A tiny bet that the price pins at one level — huge payout if right.
What is the Long Call Butterfly Options Strategy?
Imagine risking ₹60 to potentially win ₹440. That is what a Long Call Butterfly can do — if you correctly guess the exact price a stock will close at on expiry day. You combine three strikes to create a "tent" shaped profit zone. Maximum profit at the middle strike.
Why is it Called "Long Call Butterfly"?
The payoff chart looks like a butterfly with wings spread open. "Long" = you paid a debit. "Call" = all three options are calls.
How Does the Long Call Butterfly Trade Work?
- 1 Step 1 — Pick a center strike where you think the stock will close.
- 2 Step 2 — Buy one call below center.
- 3 Step 3 — Sell TWO calls at center.
- 4 Step 4 — Buy one call above center.
- 5 Step 5 — If stock closes near center at expiry, big returns.
Types of Long Call Butterfly Strategies
Long Call Butterfly (Debit)
Buy 1 low call, sell 2 middle calls, buy 1 high call. All equidistant. Small debit. Max profit at center.
Long Put Butterfly
Same payoff using puts. Use whichever is cheaper.
When to Use the Long Call Butterfly Strategy?
- Monthly expiry pin days
- Precise price target
- Cheap options in low-vol markets
- Large open interest concentration at one strike
Profit and Loss of the Long Call Butterfly
Before looking at the chart, here is a plain-English summary of what you can make and what you can lose.
Wing width minus net debit paid.
The small net debit paid.
Lower: lower strike + debit. Upper: upper strike − debit.
Long Call Butterfly Payoff Diagram
The chart below shows how profit/loss changes with the underlying price at expiry. Green zone = profit, red zone = loss.
Long Call Butterfly Example Trade
| Action | Type | Strike | Premium |
|---|---|---|---|
| Buy | Call | ₹21,500 | -₹580 |
| Sell | Call | ₹22,000 | +₹640 (×2) |
| Buy | Call | ₹22,500 | -₹120 |
NIFTY closed at ₹21,980. Spread worth ₹380. Risked ₹60, made ₹320 — 533% return.
Pros & Cons of the Long Call Butterfly
- Incredible risk/reward (7:1)
- Very low cost
- Maximum loss is tiny
- Works beautifully on expiry pin days
- Low probability
- Wrong guess = total loss of debit
- Three legs = three fees
- Needs understanding of max pain
Long Call Butterfly Frequently Asked Questions
Quick Quiz
Answer all questions and check your score.
1 A Long Call Butterfly is built with:
2 Maximum profit on a Long Call Butterfly occurs when:
3 Maximum loss on a Long Call Butterfly is:
4 All three strikes in a Long Call Butterfly must be:
5 Long Call Butterfly is best used when: