Long Put Butterfly
The all-puts version of the butterfly — buy 1 OTM put, sell 2 ATM puts, buy 1 ITM put. Same P/L profile as the Long Call Butterfly.
Profit / Loss Diagram
Long Put Butterfly at expiration
What is this strategy?
The Long Put Butterfly is functionally equivalent to the Long Call Butterfly but built with puts. Construction: buy 1 OTM put (lower strike A), sell 2 ATM puts (centre strike B), buy 1 ITM put (upper strike C). The P/L profile is exactly the same.
The choice between a put butterfly and a call butterfly is operational: it depends on which side of the chain has better liquidity on the underlying. In SPX and SPY, puts typically show greater market depth because of permanent institutional hedging.
Same use as the Long Call Butterfly: a targeted bet on a specific price level. Defined risk, with a reward-to-risk ratio typically around 3 to 1.
Construction
| Action | Instrument | Strike | Expiration | Example |
|---|---|---|---|---|
| BUY | 1 Put | Lower OTM (A) | 30-45 DTE | +1 SPY 440 Put |
| SELL | 2 Puts | ATM (B = centre) | Same expiry | -2 SPY 450 Put |
| BUY | 1 Put | Upper ITM (C) | Same expiry | +1 SPY 460 Put |
Example
SPY at $450, you expect stability. Long put butterfly 440/450/460.
- Net Debit $300
- Maximum Gain $700 if SPY = $450 exactly
- Maximum Loss $300 (the debit) if SPY < $440 or > $460
The Greeks
Same as the Long Call Butterfly.
Time works in your favour near the centre.
A short-volatility position.
High gamma risk near the centre strike.
Position Management
- 01 Same as the Long Call Butterfly Close at 50% of maximum profit, keep strikes equidistant, and use the 21–30 DTE sweet spot.