A short butterfly is an options position that reverses the ordinary butterfly spread. Using calls with the same expiry and three equally spaced strikes, the trader sells one call at the lowest strike price, buys two at the middle strike and sells one at the highest. The position is opened for a net credit. It profits when the underlying price finishes outside the outer strikes and loses most when the price finishes exactly at the middle strike.
Both profit and loss are capped. The maximum gain is the credit received. The maximum loss is the distance between adjacent strikes minus that credit. With strikes of 95, 100 and 105 and a credit of $1.50, the maximum gain is $1.50 and the maximum loss is dollars per share. The position suits an expectation of a large move either way and benefits from rising implied volatility, in contrast to the long butterfly.