Unlike outright futures trading positions which make a profit only when the futures contracts that you own appreciate or depreciate, futures butterfly spreads profit when:

both long legs rise and short leg falls
both long legs rise and short leg remains unchanged
both long legs rise and short leg rises at a lower rate
short leg falls faster than both long legs
both long legs remain unchanged and short leg falls
the near term long leg rises and all other legs remain stagnant
the far term long leg rises and all other legs remain stagnant
the near term long leg rises more than the short leg rises and far term long leg falls
the far term long leg rises more than the short leg rises and near term long leg falls
the near term long leg rises more than the far term long leg falls with short leg remaining stagnant
far term long leg rises more than the near term long leg falls with short leg remaining stagnant

Futures traders speculating that mid-term futures contracts will decline against short-term and longer-term ones could use the butterfly spread to dramatically reduce margin requirements. This can also open many more avenues to profit than an outright short position on mid-term futures contracts. Generally, traders use butterfly spreads when there is expectation of mid-term futures contracts to fall relative to short-term and/or long-term futures contracts, which changes the term structure. These changes to term structure can happen in both inverted or a normal market due to mid-term shifts within supply/demand or other seasonal factors.

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