Watch the reel
A long put butterfly is the put-side mirror of the call butterfly — a cheap, defined-risk bet that a stock pins a target on the downside. This reel walks through the structure and payoff.
Long Put Butterfly
Buy 1 ITM put, sell 2 ATM puts, buy 1 OTM put — equidistant, same expiration. Same payoff profile as a long call butterfly; construction is just a tax/skew preference.
Payoff at expiration
Example legsGreeks
When to use it
Identical to the call butterfly's use case — a pin trade — but constructed with puts. Choose based on which leg is more liquid or has more favorable skew.
Setup
Center strike at your target. Equidistant wings. Same expiration.
Steps
- 1Identify your pin target.
- 2Buy ITM put above the target.
- 3Sell 2 ATM puts at the target.
- 4Buy OTM put below the target.
- 5Submit as a single 3-leg combo.
Cost
Small debit. Max loss = debit.
Effect of price
Max profit at the center strike. Linear decay to the wings.
Effect of time
Theta-positive in the final week.
Effect of volatility
Negative vega.
Pros
- Same payoff as call fly, possibly cheaper depending on skew.
- Defined risk.
- Cheap pin trade.
Cons
- Low probability of max profit.
- Put skew can make it relatively expensive on some names.
- Needs precise pinning at expiration.
Tips
- Compare the put fly cost to the call fly cost; pick the cheaper.
- Best held close to expiration.
- Skip if there's a catalyst before expiration.
The math
Max profit = wing_width − debit (at spot = body_strike). Max loss = debit. Break-evens = body_strike ± (wing_width − debit).
Not investment advice.
