Continuing further from our previous article Long Call Butterfly Options Spread Trading
What are the breakeven points for the Long Call Butterfly Spread Option ?
Break even points are the points or spots when there is no profit - no loss for the option trader. i.e. they are the points either side of which there is a profit area and a loss area.
For a Long Call Butterfly position, there are 2 breakeven points one on the upper side and one on the lower side.
Theoretically, they can be calculated as follows:

- Upper Breakeven Point for Long Call Butterfly Spread Option = Strike Price of Higher Strike Long Call - Net Premium Paid

i.e. $65 - $6 = $59

- Lower Breakeven Point for Long Call Butterfly Spread Option = Strike Price of Lower Strike Long Call + Net Premium Paid

i.e. $35 + $6 = $41
As seen from the final BROWN colored payoff function chart, they are indicated in the final payoff function as the brown color graph crosses the horizontal axis or x-axis.

What is the maximum profit for Long Call Butterfly Spread Option Trading?
As we can see from the Brown colored payoff function, the maximum profit occurs at a PEAK point - it is NOT a spreaded region. The profit then starts declining on either side of the peak point.

Max Profit Long Call Butterfly Spread Option is reached When Price of Underlying at expiry becomes equal to the Strike Price of Short Calls
Theortically, the Profit can be calculated as:
Max Profit for Long Call Butterfly = Strike Price of Short Call - Strike Price of Lower Strike Long Call - Net Premium Paid - Brokerage & Commissions Paid
= $50 - $35 - $6 - Brokerage
= $9 - Brokerage

Please note the brokerage cost may be higher, as you are first going to open 4 positions and then (possibly) close 4 positions. If a few options get exercised, your option broker may also charge you option exercise brokerage, so be careful about the commissions.

What is the maximum loss for Long Call Butterfly Spread Option Trading?
The maximum loss in a Long Call Butterfly Spread Option is Limited, as can be seen from the horizontal parts of the brown graph on either side in the pay off fucntion.

Max Loss for Long Call Butterfly Spread Option = Net Premium Paid + Brokerage & Commissions Paid

i.e.
Loss = $6 + Brokerage

Max Loss will Occur When Price of Underlying gets lower than the Strike Price of Lower Strike Long Call
OR
Price of Underlying goes above the Strike Price of Higher Strike Long Call

What are the risks in trading Long Call Butterfly Spread Option ?
- Since there are 2 long calls and 2 short calls, the Long Call Butterfly Spread Option is assumed to be time decay neutral (See Options Time Decay: Explained with Examples).
Please note that ATM calls have the highest time decay value and ITM and OTM have lesser values. This will work in favour of Long Call Butterfly Spread Option trader since shorting the ATM will give you higher price and going long the ITM and OTM will mean you have to pay less time decay value.
But do note that time decay works in favor to this position when it is profitable and harmful when the position is unprofitable.

- Remember the high cost of commissions and brokerages you have to pay since you have to enter 4 option positions in the start and 4 at the end (of square off or exercise). Those may erode all your profits

- Also note the profit is confined to a pyramid shape and tapers downwards on both side, while loss is a broad flat region - meaning your max profit is limited to one value and goes down faster while max loss is constant and higher in magnitude

- The traders might find it a challenge to get the precise strike prices for the 4 options. Anything disproportionate can change the entire payoff scheme