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