ALRM Butterfly Strategy
ALRM (Alarm.com Holdings, Inc.), in the Technology sector, (Software - Application industry), listed on NASDAQ.
Alarm.com Holdings, Inc. provides cloud-based solutions for smart residential and commercial properties in the United States and internationally. It operates in two segments, Alarm.com and Other. The company provides interactive security solutions to control and monitor their security systems, as well as connected security devices, including door locks, motion sensors, door locks, garage doors, Internet of Things, thermostats, and video cameras; and video monitoring solutions, such as video analytics, live streaming, video doorbell, video clips, video alerts, continuous high definition recording, and commercial video surveillance solutions. It also offers intelligent automation and energy management solutions comprising scenes button; smart thermostat schedules; responsive savings; precision comfort; energy usage monitoring; heating, ventilation, and air conditioning monitoring services; whole home water safety solutions; geo-services; and demand response programs. In addition, the company provides commercial solutions, such as daily safeguards, commercial grade video, energy savings, protection for valuables and inventory, temperature monitoring, multi-site management and access control, early identification, simple to use, professionally supported, and easy to maintain. Further, it offers service provider solutions, including a permission-based online portal that offers account management, sales, marketing, training, and support tools; sales, marketing, and training services; and home builder programs, as well as wellness solutions.
ALRM (Alarm.com Holdings, Inc.) trades in the Technology sector, specifically Software - Application, with a market capitalization of approximately $2.09B, a trailing P/E of 16.38, a beta of 0.79 versus the broader market, a 52-week range of 41.49-60.25, average daily share volume of 482K, a public-listing history dating back to 2015, approximately 2K full-time employees. These structural characteristics shape how ALRM stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.79 places ALRM roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline.
What is a butterfly on ALRM?
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 ALRM snapshot
As of May 15, 2026, spot at $42.54, ATM IV 41.30%, IV rank 13.65%, expected move 11.84%. The butterfly on ALRM 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 217-day expiry.
Why this butterfly structure on ALRM specifically: ALRM IV at 41.30% is on the cheap side of its 1-year range, which favors premium-buying structures like a ALRM butterfly, with a market-implied 1-standard-deviation move of approximately 11.84% (roughly $5.04 on the underlying). The 217-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated ALRM expiries trade a higher absolute premium for lower per-day decay. Position sizing on ALRM should anchor to the underlying notional of $42.54 per share and to the trader's directional view on ALRM stock.
ALRM butterfly setup
The ALRM 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 ALRM near $42.54, the first option leg uses a $40.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed ALRM chain at a 217-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 ALRM shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $40.00 | $6.55 |
| Sell 2 | Call | $42.50 | $5.40 |
| Buy 1 | Call | $45.00 | $4.53 |
ALRM butterfly risk and reward
- Net Premium / Debit
- -$27.50
- Max Profit (per contract)
- $205.63
- Max Loss (per contract)
- -$27.50
- Breakeven(s)
- $40.28, $44.73
- Risk / Reward Ratio
- 7.477
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.
ALRM butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on ALRM. 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% | -$27.50 |
| $9.41 | -77.9% | -$27.50 |
| $18.82 | -55.8% | -$27.50 |
| $28.22 | -33.7% | -$27.50 |
| $37.63 | -11.5% | -$27.50 |
| $47.03 | +10.6% | -$27.50 |
| $56.44 | +32.7% | -$27.50 |
| $65.84 | +54.8% | -$27.50 |
| $75.25 | +76.9% | -$27.50 |
| $84.65 | +99.0% | -$27.50 |
When traders use butterfly on ALRM
Butterflies on ALRM are pinning bets - traders use them when they expect ALRM 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.
ALRM thesis for this butterfly
The market-implied 1-standard-deviation range for ALRM extends from approximately $37.50 on the downside to $47.58 on the upside. A ALRM long call butterfly is a pinning play: it pays maximum at the middle strike if ALRM settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current ALRM IV rank near 13.65% 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 ALRM at 41.30%. As a Technology name, ALRM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to ALRM-specific events.
ALRM 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. ALRM positions also carry Technology sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move ALRM alongside the broader basket even when ALRM-specific fundamentals are unchanged. Always rebuild the position from current ALRM chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on ALRM?
- A butterfly on ALRM is the butterfly strategy applied to ALRM (stock). 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 ALRM stock trading near $42.54, the strikes shown on this page are snapped to the nearest listed ALRM chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are ALRM 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 ALRM butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 41.30%), the computed maximum profit is $205.63 per contract and the computed maximum loss is -$27.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a ALRM butterfly?
- The breakeven for the ALRM butterfly priced on this page is roughly $40.28 and $44.73 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 ALRM market-implied 1-standard-deviation expected move is approximately 11.84%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on ALRM?
- Butterflies on ALRM are pinning bets - traders use them when they expect ALRM 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 ALRM implied volatility affect this butterfly?
- ALRM ATM IV is at 41.30% with IV rank near 13.65%, 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.