Long Put Butterfly: A Cheap Bet That the Stock Pins a Lower Price
You believe the stock will land at a specific, lower price at expiration, not just drift down. A long put butterfly buys a put above that price, sells two puts at it, and buys one more put below it, for a small, defined-risk bet that pays its best if you are right about the exact pin.
- Exactly what you buy and sell: one put high, two puts at the middle, one put low
- The payoff: cheap, defined risk, maximum profit only at the exact middle strike
- Your numbers: net debit paid, max profit at the pin, the narrow profitable range
- When a long put butterfly fits and why it needs precision, not just a bearish lean
A long put butterfly is the put-based mirror of a long call butterfly, aimed at a target below the current price. You buy a put above your target, sell two puts right at your target, and buy one more put below it. The two sold puts fund most of the cost of the two bought puts, leaving a small net debit that pays its best only if your pin is exactly right, and expires worthless (for a small loss) if the stock lands far from your target in either direction.
What You Actually Do
Apple trades at $200. You believe it will pin exactly at $190 by expiration, perhaps after a known event resolves and the stock settles at a lower level. You buy one 1-month $200 put for $8 a share, $800, sell two 1-month $190 puts for $3 a share each, $600 total, and buy one 1-month $180 put for $1 a share, $100.
Your net debit: $800 minus $600 plus $100 = $300 paid upfront. If Apple finishes exactly at $190, your $200 put is $10 ITM ($1,000), the two $190 puts expire worthless, and the $180 put is worthless, for a gross value of $1,000 minus your $300 cost = $700 max profit. If Apple finishes above $200 or below $180, you lose the full $300 debit.
The Payoff, Drawn
Drag the slider to see how you do at different ending prices for Apple (at 1-month expiration).
The shape is a sharp peak, mirroring the long call butterfly but centered below the current price. Profit is maximized exactly at $190 and tapers quickly moving away in either direction, hitting the max loss of $300 at or beyond $200 on the high side and $180 on the low side.
The Precision Trade: A Peak, Not a Plateau
A long put butterfly applies the same precision logic as its call-based sibling, just aimed downward.
A long condor's put side spreads its short strikes apart, creating a flat profit zone that is more forgiving but caps max profit lower. A long put butterfly concentrates both short strikes at a single point below the current price, creating a sharp peak of maximum profit exactly at that level. It is cheaper than a wider structure for the same wing width, but it demands real precision about where the stock will land, not just a general bearish lean.
The math: the middle strike is where you are betting the stock pins, often chosen around a level with technical significance, a round number, or a level implied by an expected post-event settling price.
When a Long Put Butterfly Fits
- You have a specific lower price target for expiration
- You want low-cost, defined risk
- You are comfortable with a narrow profitable range
- You only have a general bearish view, not a specific price
- You are uncertain of the exact level the stock will reach
- A wider condor better matches your conviction level
A long put butterfly is for the trader with a specific, high-conviction lower price target, not just a general bearish lean. It is not for traders who are unsure exactly where the stock will land.
A Worked Example
Walk through three scenarios: you paid $300 upfront for the butterfly.
Apple finishes at $190, exactly on your target. Max profit realized: $700. Your pin was exact.
Apple finishes at $185, close but not exact. The $200 put is $15 ITM ($1,500), the two $190 puts are $5 ITM each ($1,000 combined liability), the $180 put is worthless. Net: $1,500 minus $1,000 minus $300 = $200 profit, positive but well below the max.
Apple finishes at $205 or $170, well outside the wings. All the value nets to zero or the structure caps out, and you lose the full $300 debit.
That is the long put butterfly: a sharp, cheap bet that pays its best only if your specific lower price target is exactly right.
- A long put butterfly is buying one put, selling two at the middle strike, buying one more below, betting on a precise, lower pin.
- Max profit occurs only at the exact middle strike; max loss is the small net debit outside the wings.
- The profit zone is a sharp peak, not a wide plateau, demanding real precision about the target price.
- It fits traders with a specific lower price target, not just a general bearish or neutral view.
Pop Quiz
Two quick checks. Pick an answer and the explanation shows up right away.
How does a long put butterfly differ from a long call butterfly?
Both structures share the same shape and defined risk. The difference is direction: puts for a lower target, calls for a higher target.
What happens to a long put butterfly if the stock finishes well below the lowest strike?
Below the lowest strike, all three puts are deep ITM and their values offset each other, leaving you with the same defined max loss as if the stock finished above the highest strike.
Bottom Line
A long put butterfly is the cheapest, sharpest way to bet on a stock pinning a precise, lower price at expiration, buying a put above, selling two at the target, and buying one more below. It fits traders with genuine conviction about a specific lower level, not just a general bearish lean. Reach for it when you have a real price target in mind and want to risk very little to express that view. Avoid it if your view is more general, where a long condor's wider plateau would serve you better.