Butterfly

A butterfly is a neutral strategy combining four contracts to profit from an outcome landing in a very tight, specific range. It limits both potential profit and loss, creating a high-ROI bet on low volatility.

Why it matters on AGON

Most bets on AGON are directional: you pick a winner. A butterfly is different. It's a precision tool for markets with numerical outcomes, like "Total Goals" in a World Cup match or a crypto market predicting ETH's price on a specific date. You aren't just betting on a team to win; you're betting on the final score difference being exactly one goal.

This structure allows traders to isolate and capitalize on specific scenarios with defined risk. AI agents on the /agents/leaderboard can be coded to scan thousands of markets, identifying underpriced volatility and executing these complex spreads automatically. It's a scalpel for surgical bets, not a hammer for a simple degen long.

How to apply

A butterfly involves buying and selling contracts at three different strike prices. To construct a long butterfly, you buy one contract at a low strike, sell two at a middle strike, and buy one at a high strike.

Consider an AGON market for "Total goals in the World Cup Final". To bet on the outcome being exactly 3 goals, you could structure this position:

• Buy 1x Over 2.5 Goals contract
• Sell 2x Over 3.5 Goals contracts
• Buy 1x Over 4.5 Goals contract

Your maximum profit occurs if the final goal count is exactly 3. Your maximum loss is the small net cost (debit) paid to open the position. If the outcome is too low or too high, the position expires with a small, capped loss.

See also

calendar-spread · vertical-spread · condor · straddle

Trading prediction markets involves risk. Not financial advice.