Build a long butterfly by defining a price target, selecting three strikes and entering the four contracts as one limit order.
Define the target
Estimate where the underlying may trade near expiration and why. The middle strike represents the payoff peak, so a vague range forecast is not enough to select the structure intelligently.
Choose the contracts
For a call butterfly, buy the lower call, sell two calls at the body and buy the upper call. All legs normally share one underlying, expiration and contract multiplier.
Set equal or unequal wings
Equal distances create a symmetrical butterfly. Unequal distances create a broken-wing structure with different risk and reward on each side and require separate calculations.
Use one multi-leg order
Enter the position for a net limit debit and verify the 1:-2:1 ratio. Review liquidity at all strikes, commissions, assignment, expiration and the planned exit before sending.
A practical example
With stock at $98 and a $100 expiration target, a trader enters the 95/100/105 call butterfly for a $1.10 debit through one four-leg order.
This simplified example focuses on one structure and selected expiration outcomes. Live option prices also reflect the underlying price, time decay, rates, dividends, liquidity and transaction costs. Greeks are theoretical estimates, not guarantees.
Frequently asked questions
Why are two body options sold?
They create the payoff peak and offset much of the wing cost.
Must wings be equal?
No, but unequal wings change the payoff.
Should legs be entered separately?
A combined order normally provides clearer debit and risk control.
Continue the Butterfly Spreads cluster
Explore related guides: Butterfly Spread Profit, Loss and Breakevens · Call Butterfly vs Put Butterfly · Implied Volatility and Vega in a Butterfly Spread. For a structured sequence, use the free Level 12 – Butterfly Spread course.
Options involve risk and are not suitable for every investor. This material is educational and is not investment, tax or legal advice. Greeks are theoretical estimates, and contract terms and broker requirements can vary.