What is a Bear Butterfly?

A Bear Butterfly Spread is a limited-risk, limited-reward options strategy using Puts.

• It is a combination of a Bear Spread and a Bull Spread.
• Constructed with 3 different Put strikes (same expiry).
• Works best when you expect the underlying to settle near the middle strike (ATM) at expiry.

🔹 Market View

• Expectation: Neutral to slightly bearish.
• Best Use Case: You expect a mild decline toward a target level.

🔹 Volatility View

• Works in low IV environments (cheaper options, better risk-reward).

🔹 Example (Nifty @ 20,000)

You set up a Bear Put Butterfly:

• Buy 19,800 Put = ₹120
• Sell 2 × 20,000 Puts = 2 × ₹200 = ₹400
• Buy 20,200 Put = ₹320

👉 Net Debit = 120 + 320 – 400 = ₹40

🔹 Payoff Analysis

• Max Profit: Middle Strike – Lower Strike – Net Debit = (200 – 40) = ₹160
• Max Loss: Net Debit = ₹40
• Breakevens:
  • Lower Breakeven = 19,800 + 40 = 19,840
  • Upper Breakeven = 20,200 – 40 = 20,160

How Profit is Arrived At:

• If Nifty closes at 20,000 (middle strike):
  • 19,800 Put = 0 intrinsic
  • 20,000 Puts (short) = expire ITM (200 each × 2 = 400)
  • 20,200 Put = 200 intrinsic
  • Net payoff = 200 – 40 = ₹160 profit
• If Nifty < 19,800 or > 20,200:
  • Options cancel out → Loss = ₹40 (net debit)

How to Deploy a Bear Butterfly in Firstock

The Bear Butterfly Spread is available as a predefined strategy in the Firstock terminal. It can be deployed in just a few clicks, without the need to manually enter each leg.

🔹 Step-by-Step Deployment

1. Login to Firstock
   • Open the Firstock web or mobile app and log in with your credentials.
2. Open Option Chain / Strategy Watchlist
   • Navigate to the Strategy Watchlist or directly open the Option Chain.
3. Select Predefined Strategy
   • From the predefined list, choose “Bear Butterfly.”
4. Click on Build
   • For Nifty, the system automatically selects:
     • ATM – 200 Put → Buy
     • ATM Put → Sell (2 lots)
     • ATM + 200 Put → Buy
5. Save & Deploy
   • Review the strike prices, net debit, and margin requirements.
   • Click Save and Deploy to execute the strategy.

🔹 What You Get After Deployment

Once deployed, Firstock instantly provides:

• Payoff Chart (showing profit/loss at expiry)
• Option Greeks (Delta, Gamma, Theta, Vega)
• Breakeven Points (lower and upper)
• Probability of Profit (POP)