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Neutral OutlookDefined RiskIntermediate LevelNeutral

Long Butterfly (Standard 1-2-1 Call/Put)

Buy 1 lower wing, sell 2 center body, and buy 1 higher wing options for a small debit, targeting a pin at the center strike.

Ideal IV Regime
Low IV
Capital Required
Low (₹8k - ₹20k)
Holding Duration
1 to 3 Weeks
Breakeven Formula
Lower BE = Lower Strike + Debit; Upper BE = Higher Strike - Debit

Interactive Payoff Curve & Greeks Simulation

Visualize the theoretical profit & loss at expiry vs T+0 immediate day curves. Drag the simulation slider to stress-test your trade.

Interactive Payoff EngineRef: NIFTY 50 (@ 24,500)

Option Payoff Curve & Greeks

Lots:
Inspected Price
₹24,500
At Spot Price
P&L at Expiry
+₹6,250
Settlement Day Return
P&L Today (T+0)
+₹4,800
Immediate Move Est.
Breakeven Point(s)
₹24,250 | ₹24,750
Zero P&L Level
₹0₹4,425₹-1,425BE: 24250BE: 24750Spot 24500₹24000₹24500₹25000
Expiry P&L
T+0 Line (Today)
Breakeven
Drag slider below to stress test price moves
Simulation Slider: ₹24,000Selected: ₹24,500₹25,000

Net Option Greeks (Sensitivity Profile)

Values per 1 Lot standard unit
Net Delta (Δ)Direction
0.00
₹ move per ₹1 underlying change
Net Theta (Θ)Time Decay
+₹220/day
Daily decay erosion / accumulation
Net Vega (ν)Volatility
-₹160
P&L impact per 1% IV shift
Net Gamma (Γ)Curvature
+0.001
Rate of delta acceleration

Multi-Leg Position Structure (3 Legs)

ActionInstrument / StrikeTypeExpiryApprox DeltaEst. PremiumQty Ratio
BUY24,200 CE (Lower Wing)CALLMonthly Expiry+0.65₹4201x
SELL24,500 CE (Center Body)CALLMonthly Expiry+0.50₹2402x
BUY24,800 CE (Upper Wing)CALLMonthly Expiry+0.30₹1101x
Quantitative Mechanics

How the Structure Works

Combines a Bull Spread and a Bear Spread sharing the center strike.

A Long Butterfly is an ultra-low-cost, defined-risk pin strategy. By buying 1 lower call, selling 2 ATM calls, and buying 1 higher call, you risk a tiny debit (e.g. ₹50 points = ₹1,250) to potentially make ₹250 points (+₹6,250 = 500% ROI) if the market pins near the center on expiry.

Strike Selection Criteria

Institutional Strike Selection Rules

1Center strike at ATM; wings equidistant (300 pts).
Execution Playbook

Phased Execution Blueprint

Follow this structured sequence to eliminate emotional hesitation during order entry, lifecycle management, and final exit.

Phase 1Step 01

ATM Pinning

Deploy when expecting price to stay pinned at current level.

Checklist:
ATM center
Equidistant wings

Interactive Margin & Position Size Calculator

Calculate exact lot sizing based on the 1-2% risk rule to preserve capital against Black Swan events.

Position Sizing & Margin Engine

Options Position Size & Max Risk Calculator

₹

Total net liquid equity in your brokerage account

%

Recommended: 1.0% - 2.0% for disciplined longevity

₹

Wing width max loss or defined mental/system SL

Max Risk Budget
₹4,500
1.5% of portfolio
Recommended Position Size
1 Lots (25 Qty)
Mathematically sized
Total Trade Max Loss
₹3,500
1.17% of total capital
Est. Margin Required
₹8,000
3% margin utilization
SEBI & NSE Risk Management Guideline:Never allocate more than 30% of total liquid capital to a single options expiration cycle, even with defined-risk spreads. Keep a minimum of 40% free cash buffer to accommodate sudden IV spikes, margin surges, or rolling adjustment requirements.
Capital Preservation

Rigorous Risk Rules & Adjustment Protocols

Non-negotiable parameters for stop-loss triggers, portfolio caps, and firefighting adjustments when market tests your strikes.

Stop-Loss Rule
Max loss is capped to initial small debit.
Max Risk Budget
0.5% portfolio capital
Profit-Taking Trigger
Book at 1:3 R:R.
Adjustment & Firefighting Protocols
  • Close when near peak.
Margin & Capital Guideline:

Very low margin requirement.

Real Trade Case Study

NIFTY 24500 Long Butterfly Trade Walkthrough

May 2024Full Win
Setup Context & Rationale

Nifty consolidated at 24,500.

Legs Executed & Fill Prices

Bought 24200 CE / Sold 2x 24500 CE / Bought 24800 CE (Debit = ₹50 = ₹1,250)

Key Post-Trade Takeaways
  • Closed at 1:4 R:R.
Trade Accounting
Capital Allocated:
₹1,250
Maximum Risk Allowed:
₹1,250
Realized Net P&L:
+₹4,800 (+384% ROI)

Common Mistakes to Avoid

❌ Paying more than 20% of wing width as debit

Why it happens: Reduces R:R.

Solution: Only enter when debit is <18% of width.

Institutional Pro Tips

★One of the cheapest ways to play weekly expiry pins in India.
Knowledge Base

Long Butterfly (Standard 1-2-1 Call/Put) FAQs

Can I build a butterfly with Puts?

Yes! A Put Butterfly (Buy 1, Sell 2, Buy 1 Puts) has the exact same theoretical payoff as a Call Butterfly.

Alternative & Complementary Strategies

Neutral
Short Butterfly

Sell 1 lower wing, buy 2 center body, and sell 1 higher wing options to collect net credit, profiting if price escapes the center pin.

Learn Strategy
Neutral
Iron Butterfly

Sell an ATM Straddle and buy OTM protective wings (Call & Put) to create a defined-risk, high-credit neutral strategy.

Learn Strategy
Bullish
Long Call Butterfly (Bullishly Positioned)

Construct a low-cost 1-2-1 Call Butterfly centered at an upside target to capture high Risk:Reward returns if price hits the target zone.

Learn Strategy
SEBI Regulatory Risk Warning:Trading in derivatives (Futures & Options) carries substantial risk of loss and is not suitable for all investors. A SEBI study revealed that 89% of individual traders in the equity F&O segment incurred net losses averaging ₹50,000 annually. Content provided here is strictly for educational, analytical, and quantitative learning purposes, and does not constitute investment advice or solicitation under SEBI (Investment Advisers) Regulations.