Strategy #0000000011 · Options and payoff structures
Butterflies and condors
Place a payoff peak inside a price zone while defining risk on both sides.
A butterfly often uses three strikes in a +1, −2, +1 ratio; a condor typically uses four strikes to widen the middle. Long debit structures usually have limited risk and reward; short and iron structures reverse the exposure.
The structure centres on a middle zone with defined wings; exact payoff depends on legs and net premium.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
Rose aims her payoff at 100; Jack widens the landing zone
Rose expects a share to finish near 100. She buys a 90 call, sells two 100 calls, and buys a 110 call for a debit of 3. Her payoff is a narrow target: the expiry value peaks at 100.
At expiry at 100, the two lower-strike calls are worth 10 each, the short calls and upper call expire, so intrinsic value is 10 and net profit is 7. Below 90 or above 110, the four calls offset to zero intrinsic value and she loses the 3 debit.
A condor separates the two middle short strikes to make a wider, flatter profit zone, usually with a lower peak. A butterfly is not an automatic low-volatility win: the debit, exact expiry level and exit liquidity still matter.
- S=80Below the lower wing: maximum debit loss.
- S=90At the lower wing: debit remains at risk.
- S=95Value rises after leaving the lower wing.
- S=100At the body strike: maximum profit.
- S=105Profit falls after the body.
- S=120Above the upper wing: maximum loss.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
A symmetric long call butterfly reaches its maximum expiry value at the body strike; outside the wings, intrinsic value is zero before subtracting the debit.
K₁/K₃ are long call wings, K₂ is the two-call short body, and D is net debit. A symmetric butterfly has equal wing widths.
Greeks: the directional intuition
- Delta
- Measures first-order sensitivity to the underlying price.
- Gamma
- Measures how quickly delta changes as the underlying moves.
- Theta
- Captures the effect of time passing, all else equal.
- Vega
- Measures sensitivity to implied volatility.
A symmetric long call butterfly reaches its maximum expiry value at the body strike; outside the wings, intrinsic value is zero before subtracting the debit.
Practical context · published observations
Call butterfly P&L: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
未計買賣價差、費用、IV 重估和提前指派；condor 與其他 variants 必須另按腿重算。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Fifteen wing structures alter width, direction, funding or tail shape.
Long/short, call/put, iron and broken-wing labels are not interchangeable; write the actual legs before stating risk.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Modified call butterfly | Unequal wings | Changes wing width or quantity to shift the peak toward a directional view. | Break-evens and one-sided loss become asymmetric. |
| Long put butterfly | Put implementation | Builds a long butterfly with puts at three strikes. | Expiry shape may match, but assignment, dividends and liquidity differ. |
| Modified put butterfly | Unequal put wings | Uses put wings of different widths to shift the profit region or tail. | One-sided risk and break-evens must be recalculated. |
| Short call butterfly | Opposite side | Sells the body and buys outer call wings, targeting a move away from the centre. | Profit is usually limited to credit; calculate wing risk explicitly. |
| Short put butterfly | Opposite put side | Uses puts for negative convexity around the body, opposite a long put butterfly. | Standard wings cap risk; recalculate credit, wing widths and break-evens. |
| Long iron butterfly | Calls and puts | Buys the centre straddle and sells outer put/call wings for a net debit and move-focused thesis. | Maximum loss is the debit; price must leave the centre by more than the cost. |
| Short iron butterfly | Calls and puts | Sells the centre straddle and buys outer put/call wings for a net credit and narrow-range thesis. | Maximum profit is credit; wing width less credit sets maximum loss, with assignment risk. |
| Long call condor | Four-strike neutral | Splits the butterfly body into two short strikes for a wider plateau. | The plateau is wider but flatter, and four legs cost more. |
| Long put condor | Put neutral structure | Uses puts to build a four-strike, limited-risk plateau payoff. | Check exercise and assignment on every leg. |
| Short call condor | Short call structure | Reverses a call condor to target prices outside its central region. | Credit is limited; interior loss depends on wing widths. |
| Short put condor | Short put structure | Uses the opposite put-condor side to target price leaving a range. | Downside spot exposure and assignment can be asymmetric. |
| Long iron condor | Long wings on both sides | Buys put and call verticals to profit from a large move. | Maximum loss is debit; the move must clear wing widths and cost. |
| Short iron condor | Credit on both sides | Sells put and call verticals to keep price in a middle range. | Profit is limited to credit; a gap can approach one spread’s maximum loss. |
| Broken-wing butterfly | Unequal wing width | Intentionally makes wings unequal to reduce debit or shape one tail. | One side can have greater loss or an asymmetric break-even. |
| Christmas tree spread | 1-3-2 quantity shape | Uses unequal option quantities to create a directional piecewise payoff. | One side may leave an uncovered short option; standard butterfly risk bounds do not automatically apply. |
This example is a symmetric long call butterfly. Re-derive risk for each other structure.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.