The Unlucky Investor's Guide to Options Trading guides readers through the world of options and teaches the crucial risk management techniques for sustainable investing.


Broken Wing Butterfly: Short & Long Options



A Broken Wing Butterfly is a long butterfly spread with long strikes that are not equidistant from the short strike. This leads to one side having greater risk than the other, which makes the trade slightly more directional than a standard long butterfly spread.


Neutral / Slightly Directional



Call Broken Wing Butterfly


Put Broken Wing Butterfly



Broken wing butterfly spreads can be constructed with either all calls or all puts. The trade is comprised of two short options and a long option above and below the short strike:

Buy Call or Put (above short strike)

Sell 2 Calls or Puts

Buy Call or Put (below short strike)


    Buy 1 120 Call in XYZ
    Sell 2 105 Calls in XYZ
    Buy 1 100 Call in XYZ
    Net Credit = $1.00

    In this example, the 120 call is 15 points away from the short strike, while the 100 call is 5 points away from the short strike. Widening out the strikes on the upside leads to the trade being placed for a credit, which means there is no risk to the downside in this particular example.

    One of the long options will be further away from the short strike than the opposing side. The wider side is called the “broken” side and is what gives the strategy its name.



    Width of Narrower Spread + Credit Received


    Width of Narrower Spread - Debit Paid


    Net Credit

    (Short Strike + Width of Narrower Spread) + Credit Received

    Net Debit

    Upside: (Short Strike + Width of Narrower Spread) - Debit Paid

    Downside: Lower Long Call Strike + Debit Paid


    Net Credit

    (Short Strike - Width of Narrower Spread) - Credit Received

    Net Debit

    Upside: Higher Long Put Strike - Debit Paid

    Downside: (Short Strike - Width of Narrower Spread) + Debit Paid

    tastytrade Approach

    Our approach to broken wing butterfly spreads is simple - we always route this for a credit. When we route this trade for a credit, we eliminate the risk of losing money if the entire spread expires out of the money. Routing this trade for a credit also drastically improves our probability of profit, for this very reason.



    When routing this strategy, it is usually for a very small credit. Therefore, we won’t look to close the trade if we see a small profit from that. We usually aim for 50% of our max profit on the trade. That would be when our closest long option to the stock price goes ITM near expiration. To get a rough calculation of this, just take the distance between the closest long option and the short options and divide by two.


    If our spread goes against us, we will look to close our long spread aspect of the trade for max profit, and potentially roll the remaining short spread out in time if we can do so for a credit.

    Supplemental Content

    Episodes on Broken Wing Butterfly

    tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on 

    tastytrade is a trademark/servicemark owned by tastytrade.

    tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). 

    Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

    Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.

    © copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.