Short call butterfly

Also called: Reverse butterfly

Sell one lower call, buy two middle calls, sell one higher call: a small credit kept if the underlying ends beyond either wing.

Payoff sketch (per unit, index points)

At expiry

Today (7 days left)

Net premium

Credit 35 pts

Max profit

+35 pts (₹2,261 per lot)

Max loss

−165 pts (₹10,739 per lot)

Breakeven

24,835 / 25,165

Legs: Sell CE ATM −200 · 2× Buy CE ATM · Sell CE ATM +200. Illustration, not live prices: an index at 25,000, strikes 100 points apart, Black-Scholes premiums at 13% implied volatility, 7 days to expiry, 6.5% interest, no skew and before charges. Rupees per lot use a NIFTY lot of 65.

How it works

The inverse of the long butterfly: it loses most at the middle strike and keeps its small credit if the price moves well away.

Its reward is small relative to its worst case, so the charges on four option trades weigh heavily.

When traders use it

Expecting a move, with both the gain and the loss capped.

Greeks

Delta	Near zero when centred.
Gamma	Positive near the middle strike.
Theta	Negative near the middle strike.
Vega	Positive when centred.

Profit, loss and margin

Max profit	The net credit less charges, beyond either wing.
Max loss	(Wing width − net credit) × quantity, at the middle strike.
Breakeven	Lower strike + net credit; upper strike − net credit.
Margin	About the maximum loss.

In India

SPAN margins the whole position, so a defined-risk spread usually blocks far less than its short leg alone. Brokers grant the hedge benefit only when the protective leg is actually in the account, which is why the long leg is usually placed first.
STT is charged on the premium when an option is sold (0.15% of premium from 1 April 2026 in Arthfy's cost model). A short option left to expire, in or out of the money, is not charged STT again at settlement.
A long option that finishes in the money is exercised automatically. STT is then charged on its intrinsic value at the exercise rate (0.15% from 1 April 2026 in Arthfy's cost model), instead of the sale rate on the premium (also 0.15%) that applies when the option is sold before the close. See the lesson on the STT exercise trap.

Arthfy numbers

Arthfy's history does not cover butterflies yet.

Try it in the F&O hub

Opens the tool with this structure on today's NIFTY chain. Reading is free with an Arthfy account; some runs use free attempts.

Open in the builderPayoff, Greeks, scenario grid and charges on today's NIFTY chain

Backtest since 2016Daily data, every NIFTY expiry

Replay on expiry daysMinute data since October 2024

Open the option chainLive premiums, IV and Greeks

Butterflies & broken wings

Long call butterfly

Condors & iron butterflies

Reverse iron condor

For education: how the structure works and what it did historically, not a recommendation to trade it.