Options strategy tool · SPY & QQQ

Iron butterfly calculator: payoff, max profit, max loss and breakevens

Sell an at-the-money call and put, and buy wings above and below. You collect a larger credit than an iron condor and earn the most if price finishes at the center strike.

Underlying Price

Edit to the current price.

Days to expiration Implied volatility %

Contracts Premiums Use my own prices

Net—

Max profit—

Max loss—

Breakeven(s)—

Chance of profit*—

Reward : risk—

Price at expiration — → P/L —

At expirationEstimated value todayCurrent price

*Model estimate of finishing profitable at expiration, using a lognormal price distribution from the implied volatility above. Ignores skew, dividends and early assignment.

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How a iron butterfly is built

Buy a put (K1), sell a put (K2), sell a call (K2), buy a call (K3), same expiration. The short strikes share the same price at the center.

Max profit: Net credit, at K2Max loss: Wing width − net creditBreakevens: K2 − credit · K2 + credit

Example. SPY near 775: buy 770 put, sell 775 put, sell 775 call, buy 780 call for a $3.50 credit. Max profit $350 at 775; max loss (5 − 3.50) × 100 = $150; breakevens $771.50 and $778.50 (illustrative numbers).

Benefits

Large credit relative to the risk.
Time decay is strongest at the center strike.
Risk is defined on both sides.
Good for expressing a view that price will pin near a specific level.

Risks and trade-offs

The profit zone is narrow; small moves away from the center reduce profit quickly.
Needs price to finish close to the center strike for the maximum.
Gaps through a wing hit the full loss.
Four legs add costs; early assignment is possible.

When traders use it

Traders consider an iron butterfly when they expect very quiet price action around the current level, often into a low-volatility window.

SPY and QQQ specifics

SPY and QQQ options are American-style, so short legs can be assigned before expiration, particularly when they are in the money or ahead of an ex-dividend date. Both have very liquid option chains, tight bid/ask spreads and expirations every trading day, which matters for multi-leg strategies where each leg adds slippage. Strikes are in $1 increments near the money. Check current implied volatility and liquidity before relying on any estimate here.

Frequently asked questions

What is an iron butterfly?

A four-leg strategy with a short at-the-money straddle and long out-of-the-money wings. It collects a credit and profits most if the underlying finishes at the center strike.

Iron butterfly vs iron condor?

The iron butterfly has a larger credit and higher maximum profit but a narrower profit range; the iron condor has a smaller credit and a wider range.

What is the max loss on an iron butterfly?

The wing width minus the net credit, times 100 per contract.

What are the breakevens?

The center strike plus and minus the credit.

Know the map before you choose the contract.

The overnight ES/NQ structure, key levels and catalysts, in SPY and QQQ terms, before the 9:30 ET open.

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Educational payoff arithmetic only. Premiums are model estimates (Black-Scholes, no dividends or skew) unless you enter your own, and real fills, commissions and early assignment will differ. Options involve risk and are not suitable for all investors. LiquidityLevels provides educational market commentary, not financial advice or a recommendation to trade any strategy.