Broken Wing Butterfly: Asymmetric Risk Strategy 2026
A broken wing butterfly is a modified butterfly spread where the wings are unequal in width. By 'skipping' a strike on one side, you create an asymmetric payoff that can be entered for a net credit — meaning you get paid to put the trade on. The tradeoff is undefined risk on the widened side.
What Is a Broken Wing Butterfly?
A broken wing butterfly (BWB) takes the standard butterfly spread and makes one wing wider than the other. In a standard butterfly, the strikes are equally spaced (e.g., 95/100/105). In a broken wing butterfly, you skip a strike on one side (e.g., 95/100/110), making one wing $5 wide and the other $10 wide.
This asymmetry changes the economics dramatically. Because the wider wing costs less to buy (the far OTM option is cheaper), the overall position can often be entered for a net credit. A standard butterfly is always a debit trade — a broken wing can be free or even pay you to put it on.
The catch is that the wider wing creates more risk on that side. If the stock moves through your wider wing, your losses increase faster than in a standard butterfly. Many traders accept this because the credit received and the favorable probability make the asymmetric risk worthwhile.
Example: Stock XYZ is at $100. Standard butterfly: buy $95 call, sell 2x $100 calls, buy $105 call = $1.00 debit. Broken wing: buy $95 call, sell 2x $100 calls, buy $110 call (skip $105, go to $110) = $0.50 credit. In the BWB, if XYZ stays near $100, you profit up to $5.50 ($5 intrinsic + $0.50 credit). If XYZ drops below $95, you keep the $0.50 credit. But if XYZ rises above $105, losses mount up to $4.50 max ($10 wide wing - $5 narrow wing - $0.50 credit) at $110.
When to Use It
- When you want a butterfly-like payoff but don't want to pay a debit
- When you have a slight directional bias (skip the wing on the side you think is less likely)
- When IV is elevated and you can get a meaningful credit for the asymmetry
- As an alternative to a vertical spread with a better risk-reward at the center strike
- When you want a high probability of profit (most BWBs have 60-70% probability of making money)
How to Set It Up
1. Identify your target price (center strike) for the stock at expiration 2. Buy 1 option at the lower strike (closer wing) 3. Sell 2 options at the center strike 4. Buy 1 option at the upper strike — but skip 1-2 strikes further out than a standard butterfly would 5. For a bullish BWB (put version): use puts and skip a strike on the lower wing 6. Verify you're receiving a net credit (or at most a small debit) 7. Set a stop-loss on the wide-wing side — close if the stock moves past the center strike plus the wing width
Risk & Reward
Max profit: Narrow wing width + credit received. Occurs at the center strike. In the example: $5 + $0.50 = $5.50 ($550). | Max loss: Wide wing width - narrow wing width - credit received. In the example: $10 - $5 - $0.50 = $4.50 ($450). This occurs at the far strike on the wide side. On the narrow side: zero (you keep the credit). | Breakeven: Center strike + narrow wing width + credit on the wide side. In the example: $100 + $5 + $0.50 = $105.50.
Best Brokers for This Strategy
Tastytrade is excellent for broken wing butterflies — the platform supports complex multi-leg orders and free-to-close pricing is critical for managing BWBs. IBKR offers the best fills on asymmetric butterfly orders and has sophisticated margin calculations that properly account for the one-sided risk. thinkorswim/Schwab has the best risk visualization tools for understanding the asymmetric payoff profile. See our tastytrade review.
Not financial advice. Always do your own research.
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