Also Known as a Skip Strike Butterfly

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Directional Assumption

Neutral to Bullish

A Broken Wing Butterfly is a variant of a Butterfly with a higher probability of profit, but has more risk. We can somewhat be directionally wrong and still make money.

The long strikes are not equidistant like a normal butterfly.

When to Run It

I am anticipating that the price of the underlying stock goes up.

If the price of the stock goes down and past the breakeven point, I may be assigned the short put and will owe a defined loss.


  • – Buy Put (above short strike)
  • – Sell 2 Puts
  • – Buy Put (below short strike)

NOTE: All options have the same expiration month.


30-60 days

Ideal Implied Volatility

** 50% or greater**

Short puts allow me to capitalize when anticipating a decrease in
implied volatility (IV).

Profit Target

Butterflies need time and volatility contraction in order to make money. If my position shows a profit near 25% of the max potential gain, I will close the position early to lock in profits.

Time Decay

As time goes by theta works in my favor as I collect premium as long as the price stays above the short put strike price.

Maximum Profit

Potential profit is limited to the net credit received.

Maximum Loss

This is a defined risk trade.

Width of narrower spread plus Credit Received

Risk Management

This trade can be 3-5% of my account.

Categories: Strategies / Studies