Broken-Wing Butterfly
An asymmetric butterfly with unequal wing widths — enter for a credit with a directional lean. Risk is defined but tilted to one side.
A broken-wing butterfly is a regular butterfly with one wing stretched wider than the other. That asymmetry lets you enter the trade for a credit (or near-zero cost) instead of a debit, while keeping a defined-risk profile. The catch: you accept larger risk on the wider wing side. It’s the sweet spot between a credit spread and a butterfly — directional lean, cheap entry, and a profit tent centered on your short strike.
The structure
A broken-wing butterfly uses three strikes like a regular butterfly, but the distance between the strikes is unequal. There are two flavors:
- Call broken-wing (bullish lean): Buy 1 lower-strike call, sell 2 middle-strike calls, buy 1 higher-strike call — with a wider gap between the middle and upper strikes. Risk is larger above; below the lower strike you lose nothing.
- Put broken-wing (bearish lean): Buy 1 lower-strike put, sell 2 middle-strike puts, buy 1 higher-strike put — with a wider gap between the lower and middle strikes. Risk is larger below; above the upper strike you lose nothing.
Because one wing is wider than the other, the credit received from the two short contracts can exceed the combined cost of the two long contracts. That means you can enter the trade for a net credit — something a symmetric butterfly almost never allows. The max profit still occurs at the short strike at expiration, just like a regular butterfly.
Worked example (call broken-wing, bullish)
Stock: XYZ at $100. You think XYZ will drift sideways to slightly up over the next 30 days. You build a call broken-wing butterfly with a narrow lower wing ($5 wide) and a wide upper wing ($10 wide):
- Buy 1 × $95 call @ $7.00
- Sell 2 × $100 calls @ $4.50 each ($9.00 total)
- Buy 1 × $110 call @ $2.00
- Net cost: $7.00 + $2.00 − $9.00 = $0.00 (entered at even)
- Max profit: $5.00 (width of narrow wing) − $0.00 = $5.00 at $100
- Risk below $95: zero — the $95 long call loses value, but so does everything else. No spread risk below the lowest strike.
- Risk above $110: zero — all calls are in the money; the long $95 call and long $110 call bracket the two short $100 calls. Gains and losses offset.
- Risk between $100 and $110: this is the danger zone. At $110, the two short $100 calls are worth $10 each ($20), the $95 call is worth $15, and the $110 call is worth $0. Net: $15 − $20 = −$5.00 max loss on the wide-wing side.
- Breakeven on the upside: $105 (where the spread P&L crosses zero).
Notice the asymmetry: below $95 you have zero risk, but between $100 and $110 you can lose up to $5. You traded downside safety for upside exposure. If you had collected a small credit at entry, the max loss on the wide side would be reduced by that credit.
When to use it
- Slight directional view with a target. You think the stock will be near a specific level at expiration but want credit (or zero-cost) entry. The broken-wing lets you express that view without paying a debit.
- Earnings pin with a lean. If open interest clusters around a strike but you believe the stock is more likely to drift in one direction than the other, the broken-wing lets you shift risk away from the more probable side.
- Support/resistance conviction.If you’re confident the stock won’t breach a nearby support level, use a call broken-wing: zero risk below the lower strike, and the credit (or zero debit) funds the trade for free.
- Better capital efficiency than a butterfly. A standard butterfly requires a debit; the broken-wing often doesn’t. When you have many positions open, the zero-cost entry frees up margin for other trades.
How Tradient ranks them
The broken-wing butterfly scanner extends the standard butterfly module by allowing asymmetric wing widths. It tests narrow-wing widths from $2.50 to $10 and wide-wing widths from $5 to $20, requiring the wide wing to be at least 1.5× the narrow wing. The Tradient Score composite favors:
- Credit entry or near-zero cost. Trades entered for a credit rank higher than those requiring a meaningful debit. The whole point of breaking the wing is to eliminate the debit.
- Max-profit-to-max-loss ratio. The scanner compares the narrow-wing width (max profit) against the wide-wing risk (max loss) and favors setups where the ratio is ≥ 0.50.
- Probability of the stock staying near the short strike. Delta-implied probability of finishing between the breakevens is a core ranking factor.
- Liquidity across all three strikes. Three strikes and four contracts mean slippage adds up. The scanner penalizes wide bid-ask spreads at any leg.
Managing the trade
Take profits at 50% of max
Like a regular butterfly, the broken-wing’s profit tent peaks sharply at the short strike. If the position reaches 50% of its max profit before expiration, close it. The remaining 50% requires an increasingly precise pin — the risk is not worth the reward.
Defend the wide wing early
The wide-wing side is where your risk lives. If the stock moves toward the wide wing with more than two weeks to expiration, consider closing the entire position. Unlike a standard butterfly where both wings carry equal risk, a broken-wing can produce a full max loss on just one side. Don’t let the stock camp in the danger zone hoping for a reversal.
Don’t roll — redeploy
Broken-wing butterflies are complex three-strike structures. Rolling one leg usually distorts the asymmetry you designed at entry. If the trade isn’t working, close the entire position and open a fresh one if the thesis still holds.
Common mistakes
- Ignoring the wide-wing risk. The zero-cost entry feels like a free trade, but the wide wing carries real downside. Always calculate the max loss on the risky side before entering — it can be multiples of what a standard butterfly would risk.
- Wings too asymmetric.If the wide wing is 4× the narrow wing, you’ve essentially built a credit spread with extra legs and extra commissions. Keep the ratio between 1.5× and 2.5× for a balanced payoff.
- Using it in the wrong direction.A call broken-wing with a wide upper wing is bullish (you accept upside risk for downside safety). Don’t confuse this with a bearish trade. Double-check which side carries the risk before you click “send.”
- Forgetting liquidity on the far strike. The wide-wing long option is usually far OTM. Far-OTM options are often illiquid with wide bid-ask spreads. Check the volume and open interest on every leg, not just the ATM shorts.
Where to go next
- Call butterfly — the symmetric version. Lower risk-reward but no directional lean.
- Put butterfly — the put-side symmetric butterfly for bearish pin targets.
- Iron condor — if you want range-bound income without a directional lean.