Build a Short Call Butterfly Strategy

What is a short call butterfly?

DirectionalLimited ProfitLimited Loss

A short call butterfly is a volatility strategy that can be profitable if there is a big move in either direction. It is the opposite of a long call butterfly.

Increasing volatility or a big move is required for this strategy to become profitable. Time is harmful when the position is unprofitable, but helpful once it becomes profitable.

ABCProfitLossStock Price
  • Sell a call at strike A
  • Buy two calls at strike B
  • Sell a call at strike C