neutralPays debit

Put Butterfly

A put butterfly buys one put, sells two at a lower strike, and buys one more below that. It's the mirror of the call fly: a cheap, defined-risk bet that the stock drifts down to a specific level — a favorite for hedging with a target.

When it makes sense

You expect a decline to a specific support level, not a crash
You want cheap downside exposure with a high payoff ratio
Broken-wing variant: you want the fly to cost nothing (or a credit) by accepting extra downside risk

How it works

Buy one put at K3, sell two puts at K2, buy one put at K1 (K1 < K2 < K3), same expiration. Max profit is (K3 − K2) minus the debit, hit exactly at K2 at expiration.

Risk & reward

Maximum loss: the debit for a symmetric fly; asymmetric on a broken wing. The payoff peak is narrow — the stock overshooting your target hurts as much as it never arriving. Best entered with 2–4 weeks to expiration so the tent has time to form.

Worked example

Stock at $105. Buy the 25-day $100 put, sell two $95 puts, buy the $90 put for $0.90 ($90). Stock at $95 at expiration: worth $500 — a $410 profit. Above $100 or below $90: lose the $90.

Scan the market for put butterflys

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