Details about Long Call Butterfly Spread Trading with Payoff Chart exaplined with an example
In this article, we will discuss the Long Call Butterfly Spread Options Position and how that can be traded. It offers the options trader a limited risk limited profit potential and is considered to a direction neutral strategy - which means traders should get into this Long Call Butterfly Spread Option trading when they dont expect the underlying stock or index to move much and remain confined to a limited price range.

What is a Long Call Butterfly Spread Option position?
A Long Call Butterfly Spread Option Position is traded when the option trader has a neutral view on the price movement of the underlying stock or index - i.e. the undelrying price movement is expected to remain confined into a limited range.
It offers capped profit and capped loss potential.
The name comes from the payoff function (see below) which looks like a butterfly. There are 2 LONG CALLS and 2 SHORT CALLS required for this Long Call Butterfly Spread Option trading. Since it is constructed with Call options, hence the name includes CALL.
It is usually a net debit position.

In what scenarios is the Long Call Butterfly Spread Option Position profitable to the trader?
The Long Call Butterfly Spread Option trading is profitable to the trader when the underlying stock price does not move much in either direction.

How is the Long Call Butterfly Spread Option constructed or configured?
The Long Call Butterfly Spread Option can be constructed by taking 4 option positions -
1) 1 * ITM Long Call
2) 1 * OTM Long Call and
3) 2 * ATM Short Call positions.
(Want to know what is ITM, OTM, ATM in Options? See Moneyness of Options - OTM, ATM, ITM Options)
Theoretically, here is how it looks:

Can we have an example of Long Call Butterfly Spread Option ?
Suppose that Microsoft is trading at around $50 per share (the underlying) - just for an example. And you as an options trader are of the opinion that in 2 months this stock will not show any big price movements and its price will somewhere near its current levels of $50.
So this makes an ideal scenario for Long Call Butterfly Spread Option Position.
Hence, you buy the following:
1 ITM Long Call with Strike price of $35 at a option price of $17
1 OTM Long Call with Strike price of $65 at a option price of $3
and you sell the following
2 ATM Short Call with Strike Price of $50 at a option price of $7 each.

Hence, you pay $17 + $3 = $20 for 2 buys, while you receive $7 + $7 = $14 for 2 sells. Overall net debit for your Long Call Butterfly Spread Option comes to $14 - $20 = - $6

Payoff function for Long Call Butterfly Spread Option

Here is the payoff function for Long Call Butterfly Spread Option with all 4 options without the price being considered:

Now, let's add them up together to get the NET ORANGE colred payoff function of Long Call Butterfly Spread Option - note that price is still not considered:

Finally, let's make the adjustment for the net price of $6 you paid to construct this Long Call Butterfly Spread Option and here we get the BROWN colored final net payoff function for Long Call Butterfly Spread Option with price factored in:
Let's now continue further to Long Call Butterfly Profit & Loss Calculation and Greeks for Long Call Butterfly Option