LONG BUTTERFLY STRATEGY

Short two calls at the middle strike, and long one call each at the lower and upper strike.  The upper and lower strikes (wings) must both be equidistant from the middle strike (body), and all the options must be the same expiration.

Max Loss

The maximum loss would occur should the underlying stock be outside the wings at expiration.

Max Gain

The maximum profit would occur should the underlying stock be at the middle strike at expiration. 

 Profit/Loss

The potential profit and loss are both very limited.  In essence, a butterfly at expiration has a minimum value of zero and a maximum value equal to the distance between either wing and the body.  An investor who buys a butterfly pays a premium somewhere between the minimum and maximum value, and profits if the butterfly's value moves toward the maximum as expiration approaches.

Breakeven

The strategy breaks even if at expiration the underlying stock is above the lower strike or below the upper strike by the amount of premium paid to initiate the position.

Volatility

An increase in implied volatility, all other things equal, will usually have a slightly negative impact on this strategy.