Buy a low call, sell two calls at separated middle strikes, buy a high one. Stretching a butterfly peak into a plateau makes the structure forgiving: the maximum is earned across a band of settlement prices rather than at one of them, and the price of that is a lower maximum for the same debit. Built from calls alone, it pays for the same range an iron condor sells, financed by a debit instead of a credit. Four legs again, so the spread cost is the practical constraint on a small trade. Set the inner and outer strikes here and watch a wider body buy probability with profit.
Four distinct strikes on one ticket, unlike the butterfly's repeated middle strike — the structure to reach for when a single pinned price is too precise a bet to make. The gap between the two short strikes sets the width of the plateau where the maximum profit is held; widening it trades away some of the maximum for a larger window of prices that pay it. Compare this against pricing the equivalent iron condor at the same four strikes before choosing — the payoff is nearly identical and the choice usually comes down to which side has the tighter market.
The wider plateau between the two short strikes is the trade-off against the butterfly's larger peak; size and strike choice should follow how confident the view is about a range rather than a single price, since paying more debit for a narrower plateau buys precision that a range view does not need. As with the butterfly, most of the position's value arrives in the final weeks before expiry, so an early exit at a small loss is common and not a sign the thesis was wrong, only that it has not yet had time to play out.
Common mistake. The common mistake is treating the four-strike debit version and the equivalent iron condor as interchangeable without comparing which side's market is actually tighter on the day.
| # | Action | Instrument | Strike |
|---|---|---|---|
| 1 | Buy | Call | 560 |
| 2 | Sell | Call | 575 |
| 3 | Sell | Call | 585 |
| 4 | Buy | Call | 600 |
Computed from the same strikes and net premium as the worked example above — not a simulation, the closed-form payoff evaluated at each price.
| SPY at expiry | P&L |
|---|---|
| 545 | -$440.00 |
| 565 | $60.00 |
| 580 | $1060.00 |
| 590 | $560.00 |
| 605 | -$440.00 |
| 620 | -$440.00 |
| Strategy | Market view | Opened for | Legs vs. this one |
|---|---|---|---|
| Call Butterfly | Neutral — pinned | Debit | -1 |
| Iron Condor | Neutral — range-bound | Credit | same |
| Calendar Spread | Neutral — long volatility of time | Debit | -2 |
| Diagonal Spread | Directional — with a time component | Debit | -2 |