Real Example (July 2025)
A long call butterfly spread involves buying one lower strike call, selling two at-the-money calls, and buying one higher strike call. It profits from minimal price movement near the middle strike.
- Stock: XYZ Corp
- Outlook: Neutral with low volatility
- Setup: Buy 1 XYZ $95 Call @ $6.00, Sell 2 XYZ $100 Calls @ $3.50, Buy 1 XYZ $105 Call @ $1.50
- Net Debit: $0.50 ($50 per contract)
- Max Gain: $4.50 ($450 per contract)
- Max Loss: $50
- Breakeven: $95.50 and $104.50