TALO Butterfly Strategy
TALO (Talos Energy Inc.), in the Energy sector, (Oil & Gas Exploration & Production industry), listed on NYSE.
Talos Energy Inc. functions as an autonomous entity engaged in the discovery and extraction of hydrocarbon resources. The company primarily targets oil and natural gas fields situated in the U.S. Gulf of Mexico and within Mexico's offshore territories. By the end of 2021, specifically December 31st, Talos Energy had documented proven reserves amounting to 161.59 million barrels of oil equivalent. This inventory included 107.764 million barrels of crude oil, 236.353 billion cubic feet of natural gas, and an additional 14.435 million barrels of crude oil. The enterprise was established in 2011 and has its corporate headquarters located in Houston, Texas.
TALO (Talos Energy Inc.) trades in the Energy sector, specifically Oil & Gas Exploration & Production, with a market capitalization of approximately $2.22B, a beta of 0.32 versus the broader market, a 52-week range of 7.67-17.05, average daily share volume of 2.0M, a public-listing history dating back to 2018, approximately 700 full-time employees. These structural characteristics shape how TALO stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.32 indicates TALO has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure.
What is a butterfly on TALO?
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 TALO snapshot
As of June 30, 2026, spot at $12.93, ATM IV 53.20%, IV rank 37.72%, expected move 15.25%. The butterfly on TALO 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 17-day expiry.
Why this butterfly structure on TALO specifically: TALO IV at 53.20% 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 15.25% (roughly $1.97 on the underlying). The 17-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated TALO expiries trade a higher absolute premium for lower per-day decay. Position sizing on TALO should anchor to the underlying notional of $12.93 per share and to the trader's directional view on TALO stock.
TALO butterfly setup
The TALO 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 TALO near $12.93, the first option leg uses a $12.28 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed TALO chain at a 17-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 TALO shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $12.28 | N/A |
| Sell 2 | Call | $12.93 | N/A |
| Buy 1 | Call | $13.58 | N/A |
TALO 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.
TALO butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on TALO. 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 TALO
Butterflies on TALO are pinning bets - traders use them when they expect TALO 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.
TALO thesis for this butterfly
The market-implied 1-standard-deviation range for TALO extends from approximately $10.96 on the downside to $14.90 on the upside. A TALO long call butterfly is a pinning play: it pays maximum at the middle strike if TALO settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current TALO IV rank near 37.72% is mid-range against its 1-year distribution, so the IV signal is neutral; the butterfly thesis on TALO should anchor more to the directional view and the expected-move geometry. As a Energy name, TALO options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to TALO-specific events.
TALO 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. TALO positions also carry Energy sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move TALO alongside the broader basket even when TALO-specific fundamentals are unchanged. Always rebuild the position from current TALO chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on TALO?
- A butterfly on TALO is the butterfly strategy applied to TALO (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 TALO stock trading near $12.93, the strikes shown on this page are snapped to the nearest listed TALO chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are TALO 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 TALO butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 53.20%), 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 TALO butterfly?
- The breakeven for the TALO 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 TALO market-implied 1-standard-deviation expected move is approximately 15.25%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on TALO?
- Butterflies on TALO are pinning bets - traders use them when they expect TALO 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 TALO implied volatility affect this butterfly?
- TALO ATM IV is at 53.20% with IV rank near 37.72%, 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.