> For the complete documentation index, see [llms.txt](https://guide.laevitas.ch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.laevitas.ch/option-strategies/short-call-butterfly.md).

# Short Call Butterfly

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A Short Call Butterfly is a combination of selling a Call, buying 2 higher strike price Calls, and selling an even higher strike price Call, with the same width across all strikes.
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**Payoff Diagram:**<br>

<figure><img src="/files/ZMf7Ie4adWPqFt8KVcbi" alt=""><figcaption></figcaption></figure>

**Direction Assumption:** Neutral if done with ATM long strikes, or Bullish if done with OTM long strikes.

**Maximum Profit:** Limited to net premium collected.

**Maximum Loss:** Limited to the higher Short Call strike minus Long Call strike minus net premium collected.

**Breakeven Price:** \
• On the lower end, lower Short Call strike plus the net credit collected.\
• On the higher end, higher Short Call strike minus the net credit collected.

**Theta:** Passage of Time -> Negative Effect\
The net effect of time decay is negative. Should the underlying stays between the short strikes at expiration, all legs will decay to zero and expire worthless.

**Volatility:** \
If Volatility decreases -> Negative Effect.\
If Volatility increases -> Positive Effect. \
\
Short Call Butterflies are Vega positive, meaning that if volatility increases, the position gains value.