LABU Butterfly Strategy
LABU (Direxion Daily S&P Biotech Bull 3X ETF), in the Financial Services sector, (Asset Management industry), listed on AMEX.
The Direxion Daily S&P Biotech Bull and Bear 3X ETFs seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), of the performance of the S&P Biotechnology Select Industry Index. There is no guarantee the funds will achieve their stated investment objectives.
LABU (Direxion Daily S&P Biotech Bull 3X ETF) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $1.04B, a beta of 3.21 versus the broader market, a 52-week range of 44.685-212.45, average daily share volume of 619K, a public-listing history dating back to 2015. These structural characteristics shape how LABU etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 3.21 indicates LABU has historically moved more than the broader market, amplifying both the directional payoff and the realized volatility relative to an index-equivalent position. LABU pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on LABU?
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 LABU snapshot
As of May 13, 2026, spot at $195.63, ATM IV 88.60%, IV rank 39.05%, expected move 25.40%. The butterfly on LABU 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 28-day expiry.
Why this butterfly structure on LABU specifically: LABU IV at 88.60% is mid-range versus its 1-year history, so strategy selection should anchor more to the directional thesis than to the IV regime, with a market-implied 1-standard-deviation move of approximately 25.40% (roughly $49.69 on the underlying). The 28-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated LABU expiries trade a higher absolute premium for lower per-day decay. Position sizing on LABU should anchor to the underlying notional of $195.63 per share and to the trader's directional view on LABU etf.
LABU butterfly setup
The LABU 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 LABU near $195.63, the first option leg uses a $186.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed LABU chain at a 28-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 LABU shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $186.00 | $11.55 |
| Sell 2 | Call | $196.00 | $8.65 |
| Buy 1 | Call | $205.00 | $6.25 |
LABU butterfly risk and reward
- Net Premium / Debit
- -$50.00
- Max Profit (per contract)
- $888.20
- Max Loss (per contract)
- -$50.00
- Breakeven(s)
- $186.07
- Risk / Reward Ratio
- 17.764
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.
LABU butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on LABU. 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% | -$50.00 |
| $43.26 | -77.9% | -$50.00 |
| $86.52 | -55.8% | -$50.00 |
| $129.77 | -33.7% | -$50.00 |
| $173.03 | -11.6% | -$50.00 |
| $216.28 | +10.6% | +$50.00 |
| $259.53 | +32.7% | +$50.00 |
| $302.79 | +54.8% | +$50.00 |
| $346.04 | +76.9% | +$50.00 |
| $389.29 | +99.0% | +$50.00 |
When traders use butterfly on LABU
Butterflies on LABU are pinning bets - traders use them when they expect LABU 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.
LABU thesis for this butterfly
The market-implied 1-standard-deviation range for LABU extends from approximately $145.94 on the downside to $245.32 on the upside. A LABU long call butterfly is a pinning play: it pays maximum at the middle strike if LABU settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current LABU IV rank near 39.05% is mid-range against its 1-year distribution, so the IV signal is neutral; the butterfly thesis on LABU should anchor more to the directional view and the expected-move geometry. As a Financial Services name, LABU options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to LABU-specific events.
LABU 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. LABU positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move LABU alongside the broader basket even when LABU-specific fundamentals are unchanged. Always rebuild the position from current LABU chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on LABU?
- A butterfly on LABU is the butterfly strategy applied to LABU (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 LABU etf trading near $195.63, the strikes shown on this page are snapped to the nearest listed LABU chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are LABU 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 LABU butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 88.60%), the computed maximum profit is $888.20 per contract and the computed maximum loss is -$50.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a LABU butterfly?
- The breakeven for the LABU butterfly priced on this page is roughly $186.07 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 LABU market-implied 1-standard-deviation expected move is approximately 25.40%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on LABU?
- Butterflies on LABU are pinning bets - traders use them when they expect LABU 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 LABU implied volatility affect this butterfly?
- LABU ATM IV is at 88.60% with IV rank near 39.05%, which is mid-range against its 1-year history. Strategy selection depends more on directional thesis and expected move than on a strong IV signal.