KOS Butterfly Strategy
KOS (Kosmos Energy Ltd.), in the Energy sector, (Oil & Gas Exploration & Production industry), listed on NYSE.
Kosmos Energy Ltd. operates as an independent company primarily engaged in deep-water oil and gas exploration and production, strategically concentrating its operations along the Atlantic Margins. Its core holdings encompass productive oil assets located offshore Ghana, Equatorial Guinea, and in the U.S. Gulf of Mexico. Additionally, the firm is actively developing natural gas resources off the coasts of Mauritania and Senegal. Beyond these established and developing projects, Kosmos Energy also conducts an ongoing exploration program within proven hydrocarbon basins. This entity was founded in 2003 and maintains its principal office in Dallas, Texas.
KOS (Kosmos Energy Ltd.) trades in the Energy sector, specifically Oil & Gas Exploration & Production, with a market capitalization of approximately $1.22B, a beta of 0.73 versus the broader market, a 52-week range of 0.84-3.34, average daily share volume of 16.6M, a public-listing history dating back to 2011, approximately 216 full-time employees. These structural characteristics shape how KOS stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.73 places KOS roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. KOS pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on KOS?
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.
KOS snapshot
As of August 14, 2026, spot at $2.55, ATM IV 67.30%, IV rank 8.62%, expected move 19.29%. The butterfly on KOS below is built from the end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 35-day expiry.
Why this butterfly structure on KOS specifically: KOS IV at 67.30% is on the cheap side of its 1-year range, which favors premium-buying structures like a KOS butterfly, with a market-implied 1-standard-deviation move of approximately 19.29% (roughly $0.49 on the underlying). The 35-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated KOS expiries trade a higher absolute premium for lower per-day decay. Position sizing on KOS should anchor to the underlying notional of $2.55 per share and to the trader's directional view on KOS stock.
KOS butterfly setup
The KOS 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 KOS at $2.55 on that close, the first option leg uses a $2.42 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed KOS chain at a 35-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 KOS shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $2.42 | N/A |
| Sell 2 | Call | $2.55 | N/A |
| Buy 1 | Call | $2.68 | N/A |
KOS 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.
KOS butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on KOS. 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 KOS
Butterflies on KOS are pinning bets - traders use them when they expect KOS 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.
KOS thesis for this butterfly
The market-implied 1-standard-deviation range for KOS extends from approximately $2.06 on the downside to $3.04 on the upside. A KOS long call butterfly is a pinning play: it pays maximum at the middle strike if KOS settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current KOS IV rank near 8.62% 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 KOS at 67.30%. As a Energy name, KOS options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to KOS-specific events.
KOS 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. KOS positions also carry Energy sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move KOS alongside the broader basket even when KOS-specific fundamentals are unchanged. Always rebuild the position from current KOS chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on KOS?
- A butterfly on KOS is the butterfly strategy applied to KOS (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 KOS stock at $2.55 on the most recent close, the strikes shown on this page are snapped to the nearest listed KOS chain strike and the premiums come straight from that session's bid/ask midpoint.
- How are KOS 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 KOS butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 67.30%), 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 KOS butterfly?
- The breakeven for the KOS butterfly priced on this page is no defined breakeven on the modeled curve at expiration, derived from the end-of-day chain's premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The KOS market-implied 1-standard-deviation expected move in the same options snapshot is approximately 19.29%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on KOS?
- Butterflies on KOS are pinning bets - traders use them when they expect KOS 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 KOS implied volatility affect this butterfly?
- KOS ATM IV is at 67.30% with IV rank near 8.62%, 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.