A Short Call Butterfly is long two ATM call options, short one ITM call option and short one OTM call option.
The Max Loss is limited to the net difference between the ATM strike less the ITM strike less the premium received for the position.
The Max Gain is limited to the net premium received for the option spread.
When to use: When you are neutral on market direction and bullish on volatility. Neutral on market direction meaning that you want the market to move in either direction - i.e. bullish and bearish at the same time.
Short Call Butterfly's have a similar pay off to the Long Straddle in that the downside risk is limited. A Short Butterfly's risk is limited to the premium paid for the three options.