HDG Butterfly Strategy
HDG (ProShares - Hedge Replication ETF), in the Financial Services sector, (Asset Management industry), listed on AMEX.
The fund invests in financial instruments that ProShare Advisors believes, in combination, should track the performance of the benchmark. The benchmark seeks to provide the risk and return characteristics of the hedge fund asset class by targeting a high correlation to the HFRI Fund Weighted Composite Index (the "HFRI"). The HFRI is designed to reflect hedge fund industry performance through an equally weighted composite of over 2000 constituent funds. The fund is non-diversified.
HDG (ProShares - Hedge Replication ETF) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $25.7M, a beta of 0.33 versus the broader market, a 52-week range of 48.82-54.43, average daily share volume of 2K, a public-listing history dating back to 2011. These structural characteristics shape how HDG etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.33 indicates HDG has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. HDG pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on HDG?
A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration.
Current HDG snapshot
As of May 15, 2026, spot at $53.67, ATM IV 18.00%, IV rank 16.68%, expected move 5.16%. The butterfly on HDG below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 63-day expiry.
Why this butterfly structure on HDG specifically: HDG IV at 18.00% is on the cheap side of its 1-year range, which favors premium-buying structures like a HDG butterfly, with a market-implied 1-standard-deviation move of approximately 5.16% (roughly $2.77 on the underlying). The 63-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated HDG expiries trade a higher absolute premium for lower per-day decay. Position sizing on HDG should anchor to the underlying notional of $53.67 per share and to the trader's directional view on HDG etf.
HDG butterfly setup
The HDG butterfly below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With HDG near $53.67, the first option leg uses a $51.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed HDG chain at a 63-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 HDG shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $51.00 | $2.93 |
| Sell 2 | Call | $54.00 | $1.35 |
| Buy 1 | Call | $56.00 | $0.64 |
HDG butterfly risk and reward
- Net Premium / Debit
- -$86.50
- Max Profit (per contract)
- $207.97
- Max Loss (per contract)
- -$86.50
- Breakeven(s)
- $51.87
- Risk / Reward Ratio
- 2.404
Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit.
HDG butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on HDG. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$86.50 |
| $11.88 | -77.9% | -$86.50 |
| $23.74 | -55.8% | -$86.50 |
| $35.61 | -33.7% | -$86.50 |
| $47.47 | -11.5% | -$86.50 |
| $59.34 | +10.6% | +$13.50 |
| $71.20 | +32.7% | +$13.50 |
| $83.07 | +54.8% | +$13.50 |
| $94.94 | +76.9% | +$13.50 |
| $106.80 | +99.0% | +$13.50 |
When traders use butterfly on HDG
Butterflies on HDG are pinning bets - traders use them when they expect HDG to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
HDG thesis for this butterfly
The market-implied 1-standard-deviation range for HDG extends from approximately $50.90 on the downside to $56.44 on the upside. A HDG long call butterfly is a pinning play: it pays maximum at the middle strike if HDG settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current HDG IV rank near 16.68% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on HDG at 18.00%. As a Financial Services name, HDG options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to HDG-specific events.
HDG butterfly positions are structurally neutral / pin (limited-risk, limited-reward); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. HDG positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move HDG alongside the broader basket even when HDG-specific fundamentals are unchanged. Always rebuild the position from current HDG chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on HDG?
- A butterfly on HDG is the butterfly strategy applied to HDG (etf). The strategy is structurally neutral / pin (limited-risk, limited-reward): A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration. With HDG etf trading near $53.67, the strikes shown on this page are snapped to the nearest listed HDG chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are HDG butterfly max profit and max loss calculated?
- Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit. For the HDG butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 18.00%), the computed maximum profit is $207.97 per contract and the computed maximum loss is -$86.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a HDG butterfly?
- The breakeven for the HDG butterfly priced on this page is roughly $51.87 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current HDG market-implied 1-standard-deviation expected move is approximately 5.16%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on HDG?
- Butterflies on HDG are pinning bets - traders use them when they expect HDG to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
- How does current HDG implied volatility affect this butterfly?
- HDG ATM IV is at 18.00% with IV rank near 16.68%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.