KNOP Butterfly Strategy
KNOP (KNOT Offshore Partners LP), in the Industrials sector, (Marine Shipping industry), listed on NYSE.
KNOT Offshore Partners LP owns, acquires, and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides loading, transportation, discharge, and storage of crude oil under time charters and bareboat charters. As of March 17, 2022, it operated a fleet of seventeen shuttle tankers. The company was founded in 2013 and is headquartered in Aberdeen, the United Kingdom.
KNOP (KNOT Offshore Partners LP) trades in the Industrials sector, specifically Marine Shipping, with a market capitalization of approximately $362.9M, a trailing P/E of 15.61, a beta of -0.08 versus the broader market, a 52-week range of 6.16-11.55, average daily share volume of 109K, a public-listing history dating back to 2013, approximately 1 full-time employees. These structural characteristics shape how KNOP stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of -0.08 indicates KNOP has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. KNOP pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on KNOP?
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 KNOP snapshot
As of May 15, 2026, spot at $10.74, ATM IV 55.60%, IV rank 11.22%, expected move 15.94%. The butterfly on KNOP 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 KNOP specifically: KNOP IV at 55.60% is on the cheap side of its 1-year range, which favors premium-buying structures like a KNOP butterfly, with a market-implied 1-standard-deviation move of approximately 15.94% (roughly $1.71 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 KNOP expiries trade a higher absolute premium for lower per-day decay. Position sizing on KNOP should anchor to the underlying notional of $10.74 per share and to the trader's directional view on KNOP stock.
KNOP butterfly setup
The KNOP 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 KNOP near $10.74, the first option leg uses a $10.20 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed KNOP 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 KNOP shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $10.20 | N/A |
| Sell 2 | Call | $10.74 | N/A |
| Buy 1 | Call | $11.28 | N/A |
KNOP butterfly risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
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.
KNOP butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on KNOP. 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.
When traders use butterfly on KNOP
Butterflies on KNOP are pinning bets - traders use them when they expect KNOP 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.
KNOP thesis for this butterfly
The market-implied 1-standard-deviation range for KNOP extends from approximately $9.03 on the downside to $12.45 on the upside. A KNOP long call butterfly is a pinning play: it pays maximum at the middle strike if KNOP settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current KNOP IV rank near 11.22% 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 KNOP at 55.60%. As a Industrials name, KNOP options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to KNOP-specific events.
KNOP 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. KNOP positions also carry Industrials sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move KNOP alongside the broader basket even when KNOP-specific fundamentals are unchanged. Always rebuild the position from current KNOP chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on KNOP?
- A butterfly on KNOP is the butterfly strategy applied to KNOP (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 KNOP stock trading near $10.74, the strikes shown on this page are snapped to the nearest listed KNOP chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are KNOP 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 KNOP butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 55.60%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a KNOP butterfly?
- The breakeven for the KNOP butterfly priced on this page is no defined breakeven on the modeled curve 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 KNOP market-implied 1-standard-deviation expected move is approximately 15.94%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on KNOP?
- Butterflies on KNOP are pinning bets - traders use them when they expect KNOP 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 KNOP implied volatility affect this butterfly?
- KNOP ATM IV is at 55.60% with IV rank near 11.22%, 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.