Butterfly Spread Profit Calculator

Calculate Butterfly Spread Profit





Formula

To calculate the Maximum Profit (MP):

\[ \text{MP} = \text{HS} - \text{LS} - \text{P} \]

Where:

What is a Butterfly Spread?

A butterfly spread is a financial strategy that combines both bull and bear spreads together to create an investment that has a fixed risk but also a maximum profit. It involves buying and selling options at different strike prices to limit potential losses while capping potential gains.

Example Calculation 1

Let's assume the following values:

Using the formula:

\[ \text{MP} = 50 - 40 - 5 = 5 \text{ dollars per contract} \]

The Maximum Profit is $5 per contract.

Example Calculation 2

Let's assume the following values:

Using the formula:

\[ \text{MP} = 60 - 45 - 7 = 8 \text{ dollars per contract} \]

The Maximum Profit is $8 per contract.