Tom and Tony discuss everything you ever wanted to know about butterflies in just one segment. They explain how to setup butterflies and analyze a back-test to see if ATM Put Butterfly Spreads are better than Broken Wing Butterflies.
The success and average P/L of the Broken Wing Butterfly(BWB) were significantly greater than the Put butterfly. Although the BWB has a higher Probability of Profit, the max profit is lower, and the max loss is more significant.
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