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