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Strategy guide
Broken Wing Butterfly Strategy
Learn broken wing butterflies to achieve higher returns than standard butterflies by accepting limited risk on one side for enhanced profit potential.
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What is Broken Wing Butterfly Strategy?
is an asymmetric butterfly spread where the wings are different widths, creating a position with risk on one side only in exchange for higher profit potential.
BWBs can often be entered for credit, making them attractive compared to standard butterflies which require debit. The risk is one-directional, usually on the side opposite your bias.
Quick take. Broken wing butterfly = a butterfly with one wing wider than the other. Example: buy 1 $105 call, sell 2 $110 calls, buy 1 $120 call for a $0.50 credit. You keep the credit below $105, make up to $550 at $110, and lose at most $450 above $120.
A broken-wing butterfly widens one wing of a standard butterfly, often opening for a credit and removing risk entirely on one side.
At a glance
- Difficulty
- Advanced
- Capital needed
- $500-1,500
- Risk profile
- Credit Strategy, Directional, Higher Reward
- Compare with
- Butterfly Spread, Iron Condor
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Butterfly calculatorWhat is a Broken Wing Butterfly?
A broken wing butterfly (BWB) is a modified butterfly spread where one wing is "broken"—meaning the strikes are not equidistant from the body. This asymmetric structure allows you to collect a credit or reduce the cost to enter the trade.
Unlike a standard butterfly that costs money to enter and is perfectly balanced, a BWB can be established for a credit or small debit, making it more capital efficient while still maintaining a high-probability profit zone.
The trade-off? The risk is lopsided: little or none on one side, and a larger but still capped loss on the broken-wing side. This makes it a directional, high-probability strategy rather than a neutral one.
Key Characteristics
- ✓ Asymmetric structure—one wing further OTM than the other
- ✓ Credit or low-debit entry—more capital efficient than standard butterfly
- ✓ High probability of profit—wide profit zone
- ✓ Risk sits on the broken-wing side (capped by the far long option)
- ✓ Directional bias—slight bullish or bearish tilt
When to Use a Broken Wing Butterfly
1. Neutral to Slightly Directional
You expect the stock to stay relatively flat or move slightly in one direction. BWBs are perfect when you want to profit from range-bound movement with a directional tilt.
Example: Stock at $100, expecting it to stay between $95-$105 but slightly favoring upside.
2. High Implied Volatility
IV is elevated, allowing you to collect enough credit to establish the BWB. High IV means fatter premiums and better credit collection opportunities.
Example: IV rank above 50, with earnings or catalyst passed and IV expected to contract.
3. After Volatility Events
Post-earnings or after a major announcement when IV crushes and the stock is expected to stabilize. BWBs profit as time passes and volatility contracts.
Example: Earnings just passed, IV dropped from 80 to 40, expecting quiet period ahead.
4. Want High Probability Wins
You're focused on consistent, high-probability trades rather than home runs. BWBs typically have 65-85% probability of profit with proper strike selection.
Example: Selling far OTM strikes with only 15% chance of reaching at expiration.
5. Limited Capital Available
You want butterfly-like profit characteristics but don't want to pay the debit. BWBs can be done for a credit, requiring only margin/buying power rather than upfront capital.
Example: Receive a $50 credit with $450 max risk on the broken-wing side.
How to Set Up a Broken Wing Butterfly
Call BWB Example (Bearish)
Let's set up a call BWB on a stock trading at $100, expecting it to stay below $105:
| Position | Strike | Type | Premium |
|---|---|---|---|
| Buy 1 | $105 | Call | -$3.00 |
| Sell 2 | $110 | Call | +$2.00 each = +$4.00 |
| Buy 1 | $120 | Call | -$0.50 |
| Net Credit/Debit | +$0.50 credit | ||
Notice the asymmetry: The lower wing is $5 wide ($105 to $110), but the upper wing is $10 wide ($110 to $120). This "broken wing" allows us to collect a credit.
Position Greeks
- • Delta: Slightly negative (bearish bias due to call structure)
- • Theta: Positive (benefits from time decay)
- • Vega: Negative (profits from IV contraction)
- • Gamma: Negative near the short strikes, becomes positive near long strikes
Strike Selection Guidelines
- ✓ Short strikes (body): Slightly OTM where you expect stock to stay
- ✓ Broken wing: Far OTM with low probability of being tested
- ✓ Near wing: Closer to short strikes for defined risk
- ✓ Expiration: 30-45 DTE for optimal time decay
Put BWB (Bullish)
For a bullish BWB, use puts instead. Buy 1 higher put, sell 2 middle puts, buy 1 far OTM lower put (broken wing). This profits if the stock stays above the short strikes.
Profit & Loss Scenarios
Scenario 1: Stock Below Long Strike (Keep the Credit)
Stock at $100 at expiration
- • All calls expire worthless
- • Keep the entire credit received
- • Net profit: +$0.50 per share = $50
Result: Keep the full credit collected. No loss on this side.
Scenario 2: Stock at Short Strikes (Excellent Profit)
Stock at $110 at expiration
- • $105 long call: +$5.00
- • $110 short calls (2x): $0
- • $120 long call: $0
- • Plus original credit: +$0.50
- • Net profit: +$5.50 per share = $550
Result: Near maximum profit—sweet spot for BWBs.
Scenario 3: Stock at Near Wing (Keep the Credit)
Stock at $105 at expiration
- • $105 long call: $0
- • $110 short calls (2x): $0
- • $120 long call: $0
- • Plus original credit: +$0.50
- • Net profit: +$0.50 per share = +$50
Result: At or below the near wing you keep the credit, because every option expires worthless.
Scenario 4: Stock Beyond Broken Wing (Max Loss)
Stock at $125 at expiration
- • $105 long call: +$20.00
- • $110 short calls (2x): -$15.00 each = -$30.00
- • $120 long call: +$5.00
- • Plus original credit: +$0.50
- • Net loss: -$4.50 per share = -$450
Result: This is the max loss. Above $120 the $120 long call offsets the second short call, so the loss stays at $450 however far the stock rises.
Risk Profile Summary
- • Max profit: Width of near wing + credit (or - debit)
- • Max profit occurs: At the short strike at expiration
- • Max loss: Width of broken wing minus width of near wing, minus the credit ($10 - $5 - $0.50 = $4.50, or $450)
- • Max loss occurs: Anywhere beyond the far long strike
- • Breakeven points: One when opened for a credit (here $115.50, the short strike plus max profit); two when opened for a debit
Managing a Broken Wing Butterfly
1. Take Profits Early (50-75%)
Don't wait for expiration. If you've captured 50-75% of max profit with significant time remaining, close the trade. This reduces risk and locks in gains.
2. Close Tested Side if Breached
If the stock moves toward your broken wing (the side with the larger loss), don't let losses run. Close the entire position or convert it to a vertical spread by closing one long option.
3. Roll Out in Time
If approaching expiration without profit but still within your thesis, roll the entire structure to the next expiration cycle. This extends time for mean reversion.
4. Adjust Strikes (Roll Up/Down)
If the stock drifts toward your defined risk side, roll the entire butterfly up or down to re-center it around the current price. This may require adding a debit but resets your probability.
5. Monitor Gamma Risk
Near expiration, gamma risk explodes. Small moves can create large P&L swings. Close positions 3-5 days before expiration to avoid this risk, especially if near short strikes.
⚠️ Broken-Wing Side Management
The broken-wing side is the Achilles heel of BWBs. Set mental stop-losses at specific price levels (e.g., close if stock reaches $118 in our example).
The max loss is capped, but it is many times the credit: in the example, one full loss ($450) wipes out nine $50 winners. The high probability of profit doesn't matter if you hold every loser to the max.
BWB vs. Standard Butterfly vs. Iron Condor
| Feature | Broken Wing Butterfly | Standard Butterfly | Iron Condor |
|---|---|---|---|
| Cost to enter | Credit or small debit | Debit (cost money) | Credit |
| Risk profile | Defined both sides, larger on the broken wing | Defined both sides | Defined both sides |
| Directional bias | Slight bias (bullish or bearish) | Neutral | Neutral |
| Max profit | Medium (wing width + credit) | High (relative to cost) | Limited to credit received |
| Probability of profit | High (65-85%) | Lower (30-50%) | High (65-80%) |
| Complexity | High (4 legs, asymmetric) | Medium (4 legs, symmetric) | Medium (4 legs, two spreads) |
| Best for | High-prob income with slight bias | Neutral, high-reward pinpoint plays | Wide neutral range, consistent income |
Common Mistakes to Avoid
1. Ignoring the Broken-Wing Risk
Many traders focus on the high probability and forget the broken-wing side can lose many times the credit. Always have a plan for what to do if tested.
2. Holding Too Close to Expiration
Gamma risk near expiration can turn winners into losers overnight. Close 3-5 days before expiration if near short strikes.
3. Poor Strike Selection
Placing the broken wing too close increases the chance it gets tested. Keep it far OTM with <15% probability of touching.
4. Not Taking Profits
Waiting for max profit at expiration is greedy. Take 50-75% profit early and redeploy capital into new trades.
5. Trading in Low IV
BWBs need decent premium to collect credits. In low IV environments, you won't get enough credit to make the risk/reward attractive.
Key Takeaways
- ✓ Asymmetric butterfly where one wing is further OTM ("broken")
- ✓ Collect credit or pay small debit—more capital efficient than standard butterfly
- ✓ Risk is lopsided but capped: the broken-wing side is the one to monitor and manage
- ✓ High probability of profit (65-85%) with proper strike selection
- ✓ Directional bias—slightly bullish (put BWB) or bearish (call BWB)
- ✓ Best in high IV environments when expecting mean reversion
- ✓ Take profits at 50-75% of max profit—don't be greedy
- ✓ Close 3-5 days before expiration to avoid gamma risk
- ✓ Set stop-losses on the broken-wing side, well before the max loss
- ✓ More complex than iron condors—requires active management
Start Trading Broken Wing Butterflies
Use ApexVol's professional tools to analyze, build, and visualize BWBs. Calculate Greeks, probability of profit, and test different strike combinations before entering trades.
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- Written by
- ApexVol Research Team
Quantitative options research. All calculations use live institutional-grade data — the same source professional volatility desks use. - Reviewed by
- Ryan Silk, ApexVol Founder
Reviewed for technical accuracy. 10+ years trading options; built ApexVol's pricing engine, Greeks model and IV-rank methodology.
Revised as market conditions and institutional data change. Last revised 2026-09-29. How we research →
Questions
About Broken Wing Butterfly Strategy.
What is a broken wing butterfly?
A broken wing butterfly is a butterfly spread with one wing wider than the other. You buy one option, sell two at a middle strike, and buy one further out than a normal butterfly would. The wider wing usually lets you open the trade for a small credit instead of paying a debit.
What is the max loss on a broken wing butterfly?
The max loss is capped. It equals the width of the wide wing minus the width of the narrow wing, minus any credit received, times 100. In a $105/$110/$120 call broken wing butterfly opened for a $0.50 credit, that is ($10 - $5 - $0.50) x 100 = $450, reached at any price above $120.
When should you use a broken wing butterfly instead of a regular butterfly?
Use it when you have a mild directional view and want to be paid to enter. A regular butterfly costs a debit and loses a little on either side. A broken wing butterfly opened for a credit keeps that credit if the stock moves away from the broken wing, and only loses if it moves through it.
How do you adjust a broken wing butterfly?
Most traders take profits at 50% to 75% of max profit, close or roll the whole position if the stock moves toward the broken wing, and close it 3 to 5 days before expiration to avoid gamma risk near the short strikes.
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