A butterfly spread buys one option below the price, sells two at the price and buys one above, all with the same expiry. It costs little, can't lose more than that, and pays the most if the stock ends right on the middle strike. It's a bet that the price stays put, with the risk fixed on day one.
On 23 October 2026 SPY closed at $759.97. The 20 November 740/760/780 call butterfly cost $527 and pays up to $1,473 if SPY ends at $760. It makes money anywhere between $745.27 and $774.73, about 1.9% either way, and SPY ended a four-week stretch inside that range 37% of the time since 1993.
($29.61 + $4.74 − 2 × $14.54) × 100 = $527
($20 − $5.27) × 100 = $1,473
$745.27 and $774.73
The same tent-shaped payoff, built four ways. All use SPY's 20 November options at the 23 October bid and ask.
Buy a call below the price, sell two at the price, buy one above. The most common way to build it, and the one this guide follows.
The same strikes with puts. At expiry it pays the same as the call version; only the price you get filled at differs.
Sell a put and a call at the middle strike and buy a cheaper put below and call above. You're paid up front instead of paying, and the payoff has the same shape.
Move one outer strike further away. The wide side carries more risk, the narrow side often none, and the trade can open for a small credit.
Selling a call or put butterfly instead of buying it flips the tent: you're paid for a big move either way. The long straddle is the simpler way to make that bet, and the iron condor is the iron butterfly with its short strikes pulled apart.
Real prices from the 23 October close. Pick the call butterfly, the iron butterfly or the broken wing, and drag where SPY might close on 20 November. Switch to 6 November to see what the same trade is worth with two weeks still to go.
Time works for you while SPY sits near $760, and a jump in volatility works against you: about −$26 for each point it rises. Bought at the midpoints it would have cost $491.
The margin is one side's $20 width, and the $1,497 you receive covers most of it. You keep all of it only at $760 on the last day. Sold at the midpoints it would have paid $1,516.
Above $770 every put expires worthless and you keep the $40, so a rally can't hurt you. The risk sits on the wide side, below $749.60. Opened at the midpoints it would have paid $79.
The call butterfly's value if SPY sits still at $759.97 all month, with each option's volatility unchanged. It was bought for $527.
| Date | Worth | Profit | Share of the $1,473 top |
|---|---|---|---|
| 23 Octbought | $491 | −$36 | |
| 30 Oct | $554 | +$27 | |
| 6 Nov | $657 | +$130 | |
| 13 Nov | $868 | +$341 | |
| 17 Nov | $1,159 | +$632 | |
| 19 Nov | $1,492 | +$965 | |
| 20 Novexpiry | $1,997 | +$1,470 |
Half the month gone, SPY exactly where you wanted it, and the trade is up $130. Most of a butterfly's profit arrives in the last few days, because the two short calls you sold lose their time value fastest in the final days. The first row is the bid-ask spread: the model value right after buying is $491, $36 under what you paid. Holding to the last week for the payout means sitting through the days when a move hurts most, which is why many traders settle for part of the top and close early (see managing it).
SPY's price change over every 20-trading-day stretch since January 1993, the same length as the 23 October to 20 November trade. The shaded band is where today's butterfly makes money at expiry.
Hover or tap a bar. Price change only, without dividends; overlapping stretches from each trading day's close. The end bars hold every move past 9.5%. Our calculations from SPY's daily closes; the dollar results apply the 23 October prices to each past move.
A win rate near 37% sounds poor until you set it against the payout: risk $527 to make up to $1,473. Over 33 years the two nearly cancelled out, about −$28 a trade at today's prices, roughly the bid-ask spread you pay to get in. A butterfly isn't an edge on its own; it's a cheap, capped way to act on a view that a price will hold. The broken wing flips the profile: it won three times in four and still lost a little on average, because its losses are big and its usual win is the $40 credit.
SPY's 20 November call butterflies centred on $760, from 10 to 40 dollars wide, at the 23 October bid and ask. The last column counts the four-week stretches since 1993 that ended inside each range.
| Strikes | Cost | Most it makes | Ended inside |
|---|---|---|---|
| 750/760/770$10 wings±1.1% | $148 | $852 | 21.1% |
| 740/760/780$20 wings, the example±1.9% | $527 | $1,473 | 37.0% |
| 730/760/790$30 wings±2.5% | $1,121 | $1,879 | 46.6% |
| 720/760/800$40 wings±2.8% | $1,881 | $2,119 | 52.0% |
Narrow wings are a lottery ticket: $148 to make up to $852, but SPY has to land within about 1.1% of $760. Wide wings win more often and pay less for the risk, until the 40-dollar butterfly risks $1,881 to make $2,119. Each step out roughly trades payout for room, and in this history every width averaged a small loss of $20 to $28.
The middle strike doesn't have to be today's price. A butterfly above it is a cheap bet on a small rise; below it, on a small fall.
With the same strikes and SPY near the middle, a shorter expiry costs more and leaves a narrower range, because more of the payout is already in the price. A longer one is cheaper but takes longer to pay.
Five ways to trade a calm SPY on the same 20 November expiry, priced at the 23 October close, with how each did over the 8,472 four-week stretches since 1993.
| Strategy | The trade | Paid or cost | Most you can lose | Makes money if SPY ends | Won since 1993 |
|---|---|---|---|---|---|
| Long call butterfly | Buy the 740 call, sell two 760 calls, buy the 780 call | −$527 | $527 | Between $745.27 and $774.73; up to $1,473 | 37.0% |
| Iron butterfly | Sell the 760 put and call, buy the 740 put and 780 call | +$1,497 | $503 | Between $745.03 and $774.97 | 37.5% |
| Iron condor | Sell the 720 put and 790 call, buy the 710 put and 800 call | +$197 | $803 | Between $718.03 and $791.97 | 76.3% |
| Short straddle | Sell the 760 put and 760 call, no wings | +$2,619 | No limit above; $73,381 if SPY went to zero | Between $733.81 and $786.19 | 62.7% |
| Broken wing butterfly | Buy the 770 put, sell two 760 puts, buy the 740 put | +$40 | $960 | Above $749.60; up to $1,040 at $760 | 74.7% |
The butterfly and the iron butterfly are the same trade at expiry; here the iron version came out $24 cheaper because of where each option's bid and ask sat. The iron condor trades the butterfly's big payout for a wide range: it won twice as often and pays $197 against $803 at risk. The short straddle collects the most and wins often, but its worst four weeks in this history would have cost about $21,000. If you want to own a view that SPY stays near one price and know your worst case in advance, the butterfly is the cheapest way to do it.
Each card uses the 740/760/780 call butterfly.
Waiting for the full $1,473 means SPY has to sit on $760 at the final bell. Many traders close once the butterfly shows a set share of its top profit, such as a quarter or a half, and take the sure thing.
Once SPY is past a breakeven with little time left, the butterfly is worth little and the loss is already capped at $527. You can sell what's left or close it and open a new one around the new price, which is a new cost, not a repair.
SPY options settle in shares. If SPY ends a few cents above $760, you won't know until after the close whether your two short calls are assigned. If they are, you start Monday short 100 SPY shares. Close the whole spread on the last day.
Early assignment is rare while an option still has time value. The usual exception is a short call deep in the money the day before an ex-dividend date; SPY's next one falls in December, after this expiry. On SPX, the index itself, options are European-style and settle in cash, so there's no early assignment and no shares at expiry.
IRS Publication 550 treats each option leg on its own, so a butterfly is three or four option trades for tax purposes.
Options closed or left to expire within a year give short-term gains or losses, and closing every leg in the same year nets them into one result. If a leg is exercised or assigned, its premium goes into the cost or sale price of the shares instead.
Options on broad indexes such as SPX are Section 1256 contracts: 60% long-term and 40% short-term however long you held them, and open positions are marked to market at year end on Form 6781.
The legs of a butterfly offset each other, so closing one at a loss while keeping the others open can bring in the straddle loss-deferral rules. Closing all of it together avoids that. Other countries have their own rules; our options tax tracker keeps each realized leg and the open ones apart for the report.
Two weeks in, with SPY right on $760, the butterfly was up $130 of a possible $1,473. It's a trade for the last week, not the first.
You buy two options at the ask and sell two at the bid. On this butterfly that's $36 of the $527 before SPY moves, and again when you close. Use limit orders near the midpoint.
With SPY close to $760 at the bell, you can't know whether your short calls will be assigned. Close the spread on the last day.
The middle strike is where you think the price will be in four weeks, not where you'd like it. SPY ended above this butterfly's $774.73 breakeven in 41% of past four-week stretches.
It opened for a $40 credit and risks $960 on the wide side. It won three times in four and still lost on average.
Three strikes bought and sold for one view belong together. AllInvestView shows them as one butterfly, whether the trades sync from your broker or come from a file.
Call, put, iron and broken wing butterflies are grouped as one position, with the cost, the most it can make and lose, both breakevens and the payoff at expiry.
AllInvestView
Butterflies, condors, spreads, shares, ETFs, bonds and dividends on one dashboard, synced from your brokers or imported from a file, with every closed trade's result kept.
It's three strikes with the same expiry: buy one option below the price, sell two at the price and buy one above. It costs little, the most you can lose is what you paid, and it pays the most if the stock ends on the middle strike. On 23 October 2026 SPY's 20 November 740/760/780 call butterfly cost $527 and paid up to $1,473.
When the stock ends between the breakevens: the low strike plus what you paid and the high strike minus it. The SPY butterfly bought for $5.27 a share makes money between $745.27 and $774.73 at expiry, most of all at $760. Before expiry it's worth much less, because most of the profit arrives in the last week.
A call or put butterfly uses one type of option and you pay to open it. An iron butterfly sells a put and a call at the middle strike and buys a put below and a call above, so you're paid to open it. At expiry they pay the same. On SPY the 740/760/780 iron butterfly paid $1,497 and could lose at most $503.
A butterfly with one outer strike further away than the other. It can open for a small credit, and then it has no loss on the narrow side at expiry, but more risk on the wide side. SPY's 740/760/770 put version paid $40, made up to $1,040 at $760 and could lose $960 below $740.
They suit different views. A butterfly pays more but needs the price close to one strike; an iron condor pays less over a much wider range. On SPY's 20 November options the butterfly risked $527 to make up to $1,473, the condor $803 to make $197. Since 1993 SPY ended a four-week stretch inside the butterfly's range 37% of the time and inside the condor's 76%.
Usually not to the final bell. With the price near the middle strike, you can't know whether the two short options will be assigned, which can leave you with shares over the weekend. Many traders close once the butterfly shows a set share of its top profit and close all of it on the last day.
Each leg is an option trade. On stocks and ETFs such as SPY, options closed or expired within a year give short-term gains or losses, and closing every leg together nets them into one result. Butterflies on broad indexes such as SPX are Section 1256 contracts, taxed 60% long-term and 40% short-term and marked to market at year end.
Checked on 25 October 2026.
Costs use the ask for options bought and the bid for options sold, before commissions. Implied volatilities, deltas, time decay and the 6 November and later values come from AllInvestView's Black-Scholes engine with a 3.94% rate and each option's volatility solved from its midpoint price, held fixed. No SPY ex-dividend date falls before 20 November. Four-week moves are SPY's price change over each overlapping stretch of 20 trading days.