Broken Wing Butterfly¶
A broken wing butterfly (BWB) is an asymmetric three-strike options spread where one wing is wider than the other, removing all risk on the wider side and often allowing the position to be entered for a net credit. Unlike a standard butterfly, the distance between strikes is intentionally unequal — the "broken" wing sits on the side where the trader does not expect price to move. The result is a defined-risk structure with a high probability of profit and zero loss on the protected side if price moves in the favored direction.
HOW IT WORKS¶
A BWB is built with three strikes: one long contract at the near wing, two short contracts at the body, and one long contract at the far wing, where the far wing is placed further away than a symmetric butterfly would require. The wider outer wing reduces the cost of the hedge, and because the embedded short spread is wider than the long spread, the position collects a net credit. Maximum profit occurs if price pins at the short strikes at expiration; maximum loss is capped on the broken side and equals the difference in wing widths minus the credit received. Above the upper strike in a put BWB — or below the lower strike in a call BWB — all contracts expire worthless and the trader keeps the full credit.
IN TAPEBOARD¶
Tapeboard displays BWB positions on the payoff diagram with each leg labeled by strike and role, making the asymmetric tent shape immediately visible. The risk panel breaks out max profit, max loss, and the two breakeven prices, and flags which side carries the defined risk so traders are not misled by the "no risk on one side" framing. Theta and gamma exposure are shown per DTE, highlighting the accelerated decay near the body strikes late in the cycle. For multi-leg index fills, Tapeboard surfaces the bid/ask spread cost across all legs so traders can evaluate whether the net credit justifies the execution friction before submitting the order.