Broken Wing Butterfly

Type of Strategy

trading     /     investing


neutral, with a directional sentiment

implied volatility



Broken wing butterfly spreads are long butterfly spreads that have long strikes at different distances from the short strikes.  Broken wing butterflies are generally established for a net credit, eliminating risk to one side of the spread.  While traders often employ this strategy on stocks that have recently dropped in price, investors may use this strategy as a means of purchasing stock at a preferential price.


Using either calls or puts, a butterfly is created, though the long strikes are established at different distances from the short strikes.  The strategy should yield a net credit, which eliminates risk in one direction.  The wider side of the spread, which is the direction of risk, is considered the broken side of the butterfly. 

Investors may use broken wing butterflies for underlying stocks that they wish to purchase.  Other strategies that allow for beneficial stock purchases include naked puts, short put spreads, put ratio spreads (front), broken heart butterflies, and risk reversals.  All have costs and benefits in relation to each other, with optimal application in a variety of situations based on the holder’s preference.

example – NVAX

Investor wishes to purchase Novavax stock if it can be acquired for a price of $155/share.  Investor analyzes strategies and wishes to use a put broken wing butterfly.

1) NVAX Stock at $169.40

2) In an offensive account (tax-free), sell two 58 DTE 28 delta puts at $170 for $32.40 each, or $64.80 in total.

3) In an offensive account (tax-free), buy one 58 DTE 48 delta put at $190 for $45.30.

4) In an offensive account (tax-free), buy one 58 DTE 21 delta put at $130 for $13.30.

5) Net premium received = $6.00.

6) Breakeven = $144.00 ($150 – $6)

7) Maximum Profit = $26.00 (spread width + premium received)

8) Maximum Loss = $14.00  (purchase NVAX at $144 when NVAX price falls to $130/sh)


Traders often establish a GTC BTC order for 25-50% of the maximum profit, $6.5 – $13 in this example.  Note that this profit level at 25% is approximately equal to the net premium received.

If the stock goes against the spread, the long spread portion of the broken wing butterfly can be closed for nearly maximum profit potential.  The remaining short spread can be managed as a simple vertical, with the potential to roll out in time if a credit can be achieved.

Put Broken Wing Butterfly: NVAX