
Short Butterfly Spread offers the options trader a limited risk limited profit potential  traders should get into this Short Call Butterfly Spread Option trading when they do expect the underlying stock or index to move much rather than remaining in a confined or limited price range.
What is a Short Call Butterfly Spread Option position?
A Short Call Butterfly Option offers capped (limited) profit and capped (limited) loss potential.
The name comes from the payoff function shape (see below) which resembles a butterfly  in this case an inverted butterfly, hence the name SHORT BUTTERFLY. There are 2 LONG CALLS and 2 SHORT CALLS required for this Short Call Butterfly Spread Option trading. Since it is constructed with CALL options, hence the name includes CALL.
It is usually a net credit position i.e. the option trader taking the Short Call Butterfly Spread Option position can expect to receive a net option premium upfront.
How is the Short Call Butterfly Spread Option constructed or configured?
The Short Call Butterfly Spread Option can be constructed by taking 4 option positions 
1) 1 * ITM Short CALL
2) 1 * OTM Short CALL and
3) 2 * ATM Long CALL positions.
(Want to know what is ITM, OTM, ATM in Options? See Moneyness of Options  OTM, ATM, ITM Options)
Can we have an example of Short Call Butterfly Spread Option ?
Suppose that Microsoft stock is trading at $50 per share (the underlying)  Please note that this is just an example. You are almost certain that in next 3 months time, Microsoft will either make a big move to $70 or go down to $30
So this makes an ideal scenario to go for the Short Call Butterfly Spread Option Position.
Hence, you SELL (or go SHORT) the following:
1 OTM Short CALL with Strike price of $60 at a option price of $2
1 ITM Short CALL with Strike price of $40 at a option price of $13
and you BUY (or go LONG) the following
2 ATM Long CALL with Strike Price of $50 at a option price of $4 each.
Hence, you receive a net $2 + $13 = $15 for the 2 Short calls, while you pay $4 + $4 = $8 for 2 buys. Overall net credit for your Short Call Butterfly Spread Option comes to $15  $8 = $7. Please do note that we are quoting only option premiums or prices; the trader also needs to consider the option trading brokerage and commissions he has to pay for all these trades.
Payoff function for Short Call Butterfly Option
Here is the payoff function for Short Call Butterfly Spread Option with all 4 options without the price being considered:Please note that PINK and BLUE are $50 Put Options payoff functions, with PINK one covering BLUE one, so BLUE payoff function is not visible.
Now, let's add them up together to get the NET ORANGE colored payoff function of Short Call Butterfly Spread Option  note that price is still NOT considered:
Finally, let's make the adjustment for the net price of $7 you received to construct this Short Call Butterfly Spread Option. Since it is a net receivable, we will shift the ORANGE graph UP by $7 to get the BROWN colored final net payoff function for Short Call Butterfly Spread Option with price factored in:
Let's continue onto explanation of this Short Call Butterfly Payoff Functions and Profit & Loss Calculations
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