How are UDN 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 UDN butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 6.10%), the computed maximum profit is $36.62 per contract and the computed maximum loss is -$56.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.

What is the breakeven for a UDN butterfly?

The breakeven for the UDN butterfly priced on this page is roughly $17.56 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 UDN market-implied 1-standard-deviation expected move is approximately 1.75%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.

How does current UDN implied volatility affect this butterfly?

UDN ATM IV is at 6.10% with IV rank near 1.04%, 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.

UDN Butterfly Strategy

UDN (Invesco DB US Dollar Index Bearish Fund), in the Financial Services sector, (Asset Management - Leveraged industry), listed on AMEX.

The Invesco DB US Dollar Index Bearish (Fund) seeks to track changes, whether positive or negative, in the level of the Deutsche Bank Short USD Currency Portfolio Index - Excess Return (DB Short USD Currency Portfolio Index ER or Index) plus the interest income from the Fund's holdings of primarily US Treasury securities and money market income less the Fund's expenses. The Fund is designed for investors who want a cost effective and convenient way to track the value of the U.S. dollar relative to a basket of the six major world currencies – the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc (collectively, the "Basket Currencies"). The Index is a rules-based index composed solely of short U.S. Dollar Index futures contracts that trade on the ICE futures exchange (USDX futures contracts). The USDX futures contract is designed to replicate the performance of being short the U.S. dollar against the Basket Currencies.This Fund is not suitable for all investors due to the speculative nature of an investment based upon the Fund's trading which takes place in very volatile markets. Because an investment in futures contracts is volatile, such frequency in the movement in market prices of the underlying futures contracts could cause large losses.

UDN (Invesco DB US Dollar Index Bearish Fund) trades in the Financial Services sector, specifically Asset Management - Leveraged, with a market capitalization of approximately $135.4M, a beta of 0.22 versus the broader market, a 52-week range of 17.87-19.11, average daily share volume of 199K, a public-listing history dating back to 2007. These structural characteristics shape how UDN etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.

A beta of 0.22 indicates UDN has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. UDN pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.

What is a butterfly on UDN?

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 UDN snapshot

As of May 15, 2026, spot at $18.16, ATM IV 6.10%, IV rank 1.04%, expected move 1.75%. The butterfly on UDN 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 34-day expiry.

Why this butterfly structure on UDN specifically: UDN IV at 6.10% is on the cheap side of its 1-year range, which favors premium-buying structures like a UDN butterfly, with a market-implied 1-standard-deviation move of approximately 1.75% (roughly $0.32 on the underlying). The 34-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated UDN expiries trade a higher absolute premium for lower per-day decay. Position sizing on UDN should anchor to the underlying notional of $18.16 per share and to the trader's directional view on UDN etf.

UDN butterfly setup

The UDN 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 UDN near $18.16, the first option leg uses a $17.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed UDN chain at a 34-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 UDN shares for the stock leg in covered calls and collars).

Action	Type	Strike / Basis	Premium (est)
Buy 1	Call	$17.00	$1.20
Sell 2	Call	$18.00	$0.33
Buy 1	Call	$19.00	$0.01

UDN butterfly risk and reward

Net Premium / Debit: -$56.00
Max Profit (per contract): $36.62
Max Loss (per contract): -$56.00
Breakeven(s): $17.56
Risk / Reward Ratio: 0.654

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.

UDN butterfly payoff curve

Modeled P&L at expiration across a range of underlying prices for the butterfly on UDN. 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	-99.9%	-$56.00
$4.02	-77.8%	-$56.00
$8.04	-55.7%	-$56.00
$12.05	-33.6%	-$56.00
$16.07	-11.5%	-$56.00
$20.08	+10.6%	-$56.00
$24.10	+32.7%	-$56.00
$28.11	+54.8%	-$56.00
$32.12	+76.9%	-$56.00
$36.14	+99.0%	-$56.00

When traders use butterfly on UDN

Butterflies on UDN are pinning bets - traders use them when they expect UDN 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.

UDN thesis for this butterfly

The market-implied 1-standard-deviation range for UDN extends from approximately $17.84 on the downside to $18.48 on the upside. A UDN long call butterfly is a pinning play: it pays maximum at the middle strike if UDN settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current UDN IV rank near 1.04% 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 UDN at 6.10%. As a Financial Services name, UDN options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to UDN-specific events.

UDN 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. UDN positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move UDN alongside the broader basket even when UDN-specific fundamentals are unchanged. Always rebuild the position from current UDN chain quotes before placing a trade.

Frequently asked questions

What is a butterfly on UDN?: A butterfly on UDN is the butterfly strategy applied to UDN (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 UDN etf trading near $18.16, the strikes shown on this page are snapped to the nearest listed UDN chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
How are UDN 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 UDN butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 6.10%), the computed maximum profit is $36.62 per contract and the computed maximum loss is -$56.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
What is the breakeven for a UDN butterfly?: The breakeven for the UDN butterfly priced on this page is roughly $17.56 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 UDN market-implied 1-standard-deviation expected move is approximately 1.75%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
When should you consider a butterfly on UDN?: Butterflies on UDN are pinning bets - traders use them when they expect UDN 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 UDN implied volatility affect this butterfly?: UDN ATM IV is at 6.10% with IV rank near 1.04%, 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.