What is a broken wing butterfly in options trading?

It is a butterfly spread where one long wing is placed further from the short strikes than the other. Using calls, you buy one lower strike call, sell two middle strike calls, and buy one higher strike call that is a strike or more further away than it would be in a standard butterfly. The unequal wings collect extra premium and shift the risk to one side.

How do you calculate max loss on a broken wing butterfly?

Take the width of the wider wing, subtract the width of the narrower wing, and then subtract any net credit received or add any net debit paid. Multiply by 100 for one contract. With a $5 lower wing, a $10 upper wing, and a $0.20 credit, the maximum loss is $480.

Can a broken wing butterfly have no risk on one side?

Yes, when it is opened for a net credit. In a call broken wing butterfly, every option expires worthless if the stock finishes below the lowest strike, so the trader simply keeps the credit. If the trade is opened for a debit instead, the downside loss equals the debit paid.

Broken wing butterfly vs iron condor: which is better?

An iron condor has two equal risk zones and profits over a wide range, while a broken wing butterfly has one risk zone and a peaked profit near the short strikes. The butterfly can offer a higher maximum profit and no risk in one direction, but it needs the stock to finish nearer a specific price. Condors suit range traders, broken wing butterflies suit traders with a directional lean.

Where is the breakeven on a broken wing butterfly?

For a credit call broken wing butterfly there is one breakeven above the short strikes. It equals the short strike plus the narrower wing width plus the net credit. In the example that is $105 plus $5 plus $0.20, or $110.20. A debit version adds a second breakeven just above the lowest strike.

Is a broken wing butterfly a good strategy for beginners?

It is more complex than a vertical spread because of the three strikes and the lopsided payoff, and the two short options at the body create significant gamma risk near expiration. Traders already comfortable with credit spreads and butterflies usually pick it up quickly, ideally starting with one contract on a liquid underlying.

Broken Wing Butterfly Calculator & strategy guide

Butterflies & RatiosAdvancedNeutralDefined risk

Buy one option, sell two middle options, and buy a farther wing to skew risk and reward.

Payoff at expiration

Worked example: XYZ at $100, 45 days to expiration

Profit Loss Breakeven

Max profit: +$520; Middle strike value less net debit, or plus net credit
Max loss: −$480; Wider wing width − narrower wing width − net credit, or net debit paid
Breakeven: $110.20; Depends on wing widths and net debit or credit

The trade · net credit $0.20 a share ($20)

Buy $100 call · $3.30
Sell 2 $105 calls · $1.90
Buy $115 call · $0.30

Price this broken wing butterfly on SPY with today's chain — then change the ticker, strikes and expiry.

Open in Build

What is a broken wing butterfly?

A broken wing butterfly is a three-strike options spread that starts as a standard butterfly and then moves one of the wings further away from the body. Using calls, you buy one call near the current stock price, sell two calls at a higher strike, and buy one call at a strike that is further above the short strikes than the first long call is below them. The unequal wing widths are what make it broken.

Skipping a strike on the far wing collects extra premium, because the protective call you buy is cheaper. That extra premium often turns what would be a small debit into a small credit or a near-zero cost. The result is a trade that has little or no risk on one side of the stock price and a defined, larger risk on the other.

The payoff diagram is a lopsided tent. Profit peaks at the short strike, where the long call has its maximum value relative to the short calls. It falls back to a flat line on the downside equal to the credit received or the debit paid, and it drops to a flat loss on the upside once the stock passes the far wing.

Setup

Leg	Strike	Expiry
Buy 1 call	At the money	Near
Sell 2 call	1 strike OTM	Near
Buy 1 call	3 strikes OTM	Near

Broken Wing Butterfly example

XYZ trades at $100 with 45 days to expiration. You buy the $100 call for $3.30, sell two $105 calls for $1.90 each ($3.80 total), and buy the $115 call for $0.30. Total paid is $3.60 and total collected is $3.80, so the trade opens for a net credit of $0.20 per share, or $20 per butterfly. The lower wing is $5 wide and the upper wing is $10 wide.

Stock at expiration	Result
$100 or below	All three strikes expire worthless. You keep the $20 credit, which is the entire result on the downside.
$105	The $100 call is worth $5.00 ($500). The short $105 calls and the $115 call expire worthless. P&L is $500 plus the $20 credit, or $520, the maximum profit.
$110.20	Breakeven. The $100 call is worth $10.20 ($1,020), the two short $105 calls cost $5.20 each ($1,040), and the $115 call is worthless. Intrinsic value nets to −$20, exactly offset by the $20 credit.
$115 or above	The $100 call is worth $15.00 ($1,500) and the two short $105 calls cost $10.00 each ($2,000). Above $115 the long $115 call offsets one short call, so the loss stops growing. Net intrinsic is −$500, plus the $20 credit gives −$480, the maximum loss.

Maximum profit is $520 if XYZ closes exactly at $105. Maximum loss is $480 (the $10 upper wing minus the $5 lower wing, less the $0.20 credit) if XYZ finishes at or above $115. There is no downside risk because the trade was opened for a credit, and the only breakeven is $110.20.

When to use a broken wing butterfly

You have a mildly bullish or neutral view and expect the stock to drift toward the short strike without racing past it.
You want a butterfly-style payoff but do not want to pay a debit for it, accepting a larger loss zone on one side in exchange.
Implied volatility is moderately elevated, so the extra short premium collected by skipping a strike is meaningful.
You want zero risk in one direction: a call version opened for a credit cannot lose if the stock falls, and a put version cannot lose if it rises.
Typical entries use 30 to 60 days to expiration, place the short strikes near a price target or a technical level, and set the far wing one or two strikes beyond where a standard butterfly would put it.

Risks to understand

The loss zone is concentrated. In the example a move to $115 or higher loses $480 against a maximum gain of $520, and a fast rally through the short strikes can produce that loss well before expiration.
Two short calls sit at the peak of the tent. If the stock pins near $105 into expiration, gamma is extreme and the position value can swing hundreds of dollars on small moves.
Early assignment on the short calls is possible once they are in the money, particularly right before an ex-dividend date, which can leave you short stock against a long call.
Rising implied volatility hurts the position when the stock is near the short strikes, because the two short options gain value faster than the wings.
Three legs mean wider effective bid-ask spreads, and a $0.20 credit can easily become a debit if you chase the market.

Managing the trade

Enter as a single multi-leg order at a limit price rather than legging in, because the credit is small and slippage on any one leg can flip it to a debit.
If the stock rallies toward the short strikes early, many traders close for a partial profit rather than wait for the peak, which only fully develops close to expiration.
When the stock threatens the far wing, the upper spread can be rolled up or out in time, or the whole position can be closed for a loss smaller than the maximum.
If the stock drops well below the long call and the position is worth nearly nothing, closing the short calls for pennies removes remaining tail risk and frees margin.
Avoid holding into the final days when the stock is within a few dollars of the short strikes, unless you are prepared for assignment and the resulting stock position.

Broken Wing Butterfly FAQs

What is a broken wing butterfly in options trading?: It is a butterfly spread where one long wing is placed further from the short strikes than the other. Using calls, you buy one lower strike call, sell two middle strike calls, and buy one higher strike call that is a strike or more further away than it would be in a standard butterfly. The unequal wings collect extra premium and shift the risk to one side.
How do you calculate max loss on a broken wing butterfly?: Take the width of the wider wing, subtract the width of the narrower wing, and then subtract any net credit received or add any net debit paid. Multiply by 100 for one contract. With a $5 lower wing, a $10 upper wing, and a $0.20 credit, the maximum loss is $480.
Can a broken wing butterfly have no risk on one side?: Yes, when it is opened for a net credit. In a call broken wing butterfly, every option expires worthless if the stock finishes below the lowest strike, so the trader simply keeps the credit. If the trade is opened for a debit instead, the downside loss equals the debit paid.
Broken wing butterfly vs iron condor: which is better?: An iron condor has two equal risk zones and profits over a wide range, while a broken wing butterfly has one risk zone and a peaked profit near the short strikes. The butterfly can offer a higher maximum profit and no risk in one direction, but it needs the stock to finish nearer a specific price. Condors suit range traders, broken wing butterflies suit traders with a directional lean.
Where is the breakeven on a broken wing butterfly?: For a credit call broken wing butterfly there is one breakeven above the short strikes. It equals the short strike plus the narrower wing width plus the net credit. In the example that is $105 plus $5 plus $0.20, or $110.20. A debit version adds a second breakeven just above the lowest strike.
Is a broken wing butterfly a good strategy for beginners?: It is more complex than a vertical spread because of the three strikes and the lopsided payoff, and the two short options at the body create significant gamma risk near expiration. Traders already comfortable with credit spreads and butterflies usually pick it up quickly, ideally starting with one contract on a liquid underlying.