Learn / Strategies
Butterfly spread
BTO (buy to open) the wings and STO (sell to open) twice as many at the body. A defined-debit bet that price lands near the middle strike.
BTO (buy to open) 1× lower call, STO (sell to open) 2× middle, BTO (buy to open) 1× higher, equal width, same expiration. Small debit. Max gain if price pins the body. Max loss is the debit. Puts can build the same shape.
SPY $560. BTO (buy to open) $550 and $570. STO (sell to open) 2× $560. Debit $1.60. Pin $560: about +$840. Miss: lose $160. Journal qty 2 on the body.
The lab shorts two at the body. Slide around $560: P/L (profit and loss) peaks at the pin. Miss either wing and you lose the debit.
Teaching lab
Long wings, short two at the body
SPY $560. BTO $550 and $570. STO 2× $560. Debit $1.60. Pin the body.
- P/L / share
- -0.62
- ×100
- -62
- Delta
- 0.000
- Gamma
- -0.0006
- Theta / day
- +0.0164
- Vega / vol pt
- -0.0388
P/L / share
vs the lesson entry
Delta
share-equivalent
Gamma
peaks near the strikes
Theta / day
clock
Vega / vol pt
fear priced in
Rho / rate pt
small at 30 days
Qty 2 on the body. Miss the pin: lose the debit. Teaching only.
Try it: What if (teaching lab)
Tickets for this structure
BTO (buy to open) · STO (sell to open) · BTC (buy to close) · STC (sell to close). Illustrative fills only. We never send these orders.
BTO (buy to open)
Open a long
Buy to open (wings)
SPY $560. BTO (buy to open) 1× 30-DTE (days to expiration) $550 call and 1× $570 call. Wings cost $4.80 in this lesson.
STO (sell to open)
Open a short
Sell to open (body, two contracts)
STO (sell to open) 2× 30-DTE (days to expiration) $560 at $1.60 each. Debit $1.60. Pin $560 ≈ +$840. Miss: −$160.
STC (sell to close)
Close a long
Sell to close (wings)
STC (sell to close) both longs with BTC (buy to close) the two shorts. Leave the body and you are naked 2× $560.
BTC (buy to close)
Close a short
Buy to close (body)
BTC (buy to close) the two $560. Finish $540: all die, −$160. Finish $560: max-gain path on these numbers.
Pin risk and extra contracts
You are short two and long two. The journal must show qty 2 on the body. A butterfly wants a quiet tape into expiration. A large gap through either wing leaves you with the debit loss, not a condor-sized disaster — that is the point of the defined debit.
How the Greeks move
Long wings, short two at the body: delta is near zero if you pin $560, you collect some theta in the middle, gamma is the pin story. Slide away from $560: P/L (profit and loss) falls toward the debit.
Checking for a quiz…
Teaching numbers only — not a live quote, not a fill, not financial advice. All lessons · Back to Practice · Replay · Journal.