strategy comparison
Broken Wing Butterfly vs Butterfly Spread
A broken wing butterfly is a butterfly with one wing wider than the other.
Side by side
Same eight dimensions for both structures — outlook, risk, Greeks, capital, complexity, and the IV environment each one wants.
| Dimension | Broken Wing Butterfly | Butterfly Spread |
|---|---|---|
| Outlook | neutral / bullish / bearish | neutral |
| Max profit | Width of narrow wing + credit received | Width of spread - premium paid |
| Max loss | Width of wide wing - credit received | Premium paid |
| Breakevens | Middle strike +/- adjusted for credit | Middle strike +/- max profit |
| Greeks exposure | Butterfly-style pin risk with a directional tilt; positive theta when entered for a credit. | Delta-neutral at the body; small positive theta late, low net vega, gamma concentrated at the wings. |
| Capital / margin | Credit entry: risk is the wider wing minus the credit; no naked margin. | Small net debit; no margin. |
| Complexity | expert | advanced |
| Best IV environment | Mid-to-high IV improves the credit; less IV-sensitive than a condor. | Most regimes — the trade targets a pin at the body, not an IV level. |
Payoff at a glance
Illustrative P/L at expiration for both structures at a $100 underlying. Exact strikes and premiums are on each strategy's guide.
The verdict
When to choose which
A broken wing butterfly is a butterfly with one wing wider than the other. Choose the plain butterfly when your view is symmetric — pin the middle, equal risk both sides, small debit; choose the broken wing when you have a directional lean and want the structure to often enter for a credit — the wider wing finances the position and shifts the profit tent toward one side. Same pin logic, skewed payoff.
Frequently asked questions
Why would one wing be wider?
To collect a credit. The extra width on one side sells more premium than the other side buys, which pays for — and skews — the structure.
What does the broken wing give up?
Symmetry: the loss on the wide-wing side is larger than on the narrow side. You accept a known larger worst case on one side in exchange for the credit and the tilt.
Which side should be broken?
The side you think the stock will not visit. Traders break the wing away from their lean — the credit is sweeter when your thesis holds.