> 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-put-butterfly.md).

# Short Put Butterfly

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

<figure><img src="https://1780133611-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F5XlTHrw6jWA1Duk8yCcW%2Fuploads%2FbVwyi5iGc6GBjmsXEbUW%2Fimage.png?alt=media&amp;token=9d56a135-6b81-4cbc-baab-0dee50cc462a" alt=""><figcaption></figcaption></figure>

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

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

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

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