Broken Wing Butterfly vs Butterfly Spread: Which Fits Your Outlook?
A broken wing butterfly and a standard butterfly spread are both built from the same three-strike, four-contract skeleton: buy one option, sell two at a middle strike, buy one more further out. The difference is symmetry. A standard butterfly uses equal-width wings on both sides of the short strikes, which keeps risk capped and identical in both directions. A broken wing butterfly skips a strike on one side, making that wing wider, which shifts the trade toward a net credit and reshapes where the risk sits.
This guide compares both strategies side by side, walks through a worked example using the same stock price and strikes for each, and links to the free calculators so you can model your own numbers before placing a trade. Options trading involves risk, including the possible loss of the full amount invested.
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What Is a Butterfly Spread?
A standard long butterfly spread buys one option at a lower strike, sells two options at a middle “body” strike, and buys one more option at an upper strike, with the two wing widths set equal to each other. The position is entered for a net debit, and that debit is the maximum possible loss if the stock finishes at or beyond either wing at expiration. Maximum profit is reached only if the stock pins exactly at the body strike, and equals the wing width minus the debit paid, multiplied by 100 shares.
Because both wings are the same width, the risk and the narrow profit zone are symmetric on either side of the body strike. Use the butterfly spread calculator to see the exact profit zone, breakevens, and debit for your own strikes.
What Is a Broken Wing Butterfly?
A broken wing butterfly (BWB) starts from the same three-strike structure but skips a strike on one side, making that wing wider than the other. The wider wing means the two short options bring in more premium than the two long options cost, which often turns the entry into a net credit instead of a net debit. For a call BWB, that credit is collected in exchange for taking on more risk on the upside: if the stock rallies far past the upper strike, the loss is the difference between the two wing widths minus the credit received, which is larger than a standard butterfly’s capped debit.
The payoff for the downside is different too. When entered for a net credit, a call BWB that finishes below the lower long strike simply keeps the credit, with no further loss. A standard butterfly has no such advantage; it loses its full debit on either side. Use the broken wing butterfly calculator to see the exact credit, wing widths, and both loss zones for your own strikes.
Broken Wing Butterfly vs Butterfly Spread: Key Differences
| Factor | Butterfly Spread | Broken Wing Butterfly |
|---|---|---|
| Wing widths | Equal on both sides of the body strike | Unequal; one side skips a strike and is wider |
| Entry cost | Net debit, paid upfront | Often a net credit, collected upfront |
| Downside (below lower strike) | Lose the full net debit | Keep the net credit, no further loss (credit entry) |
| Upside (above upper strike) | Lose the full net debit (same as downside) | Lose the wing-width difference minus the credit (can exceed the standard butterfly’s max loss) |
| Max profit | Wing width minus debit, at the body strike | Lower wing width plus credit, at the short strike |
| Fits when | You want symmetric, capped risk with no directional lean | You lean neutral-to-bearish and will accept more upside risk for a cheaper, or credit, entry |
The core trade-off is where the risk sits. A standard butterfly spreads its (smaller, fixed) risk evenly across both directions in exchange for a debit paid upfront. A broken wing butterfly removes or reduces the downside risk entirely by collecting a credit, but pays for that with a larger, uncapped-feeling loss zone if the stock rallies hard through the wider wing. Neither structure is strictly better; the right one depends on whether you have a directional lean and how much upside risk you are willing to carry to get a cheaper, or credit, entry.
When to Use a Butterfly Spread
A standard butterfly tends to fit when you have a specific price target and no real directional bias beyond that level, such as a stock you expect to settle near a support or resistance zone by expiration. Because both wings are equal, the risk is the same whether the stock overshoots the target to the upside or the downside, which makes the debit easy to size against how confident you are in that target.
It also fits traders who want the maximum loss to be a small, known, paid-upfront number rather than a credit that can turn into a larger loss under an adverse move. The trade-off is that both directions carry the same defined risk, so there is no asymmetric benefit if you do have a mild directional lean.
When to Use a Broken Wing Butterfly
A broken wing butterfly tends to fit when you are neutral to slightly bearish and want the position to carry no downside risk at all past the lower strike, in exchange for a wider, riskier upside wing. It is a common choice in higher implied volatility environments, where the credit collected is large enough to justify the added upside exposure.
It also fits traders comfortable actively managing a position that finishes near the short strike, since that is where the trade earns its full profit. The limitation is the upside wing: if the stock rallies sharply past the wider strike, the loss can exceed what a standard butterfly would have lost on the same size trade, so the credit needs to be large enough to make that risk worth taking.
A Quick Example with Real Numbers
Assume XYZ is trading at $100. Both examples use a $100 short strike and a $110 upper strike, so the only thing that changes is the lower strike and how it is priced.
Butterfly spread: Buy the $90 call, sell two $100 calls, buy the $110 call, all equal $10 wings. Net debit is $2.00 per share ($200 per contract). Max profit is $800 (($10 wing minus $2 debit) × 100) if the stock pins at $100. Max loss is $200 if the stock closes at or beyond $90 or $110. Breakevens are $92 and $108.
Broken wing butterfly: Buy the $95 call, sell two $100 calls, buy the $110 call, for a $5 lower wing and a $10 upper wing (the broken wing). This combination is entered for a net credit of $0.50 per share ($50 per contract). Max profit is $550 (($5 lower wing × 100) + $50 credit) if the stock pins at $100. Below $95 at expiration, the position simply keeps the $50 credit with no further loss. Above $110, the upside max loss is $450 ((($10 − $5) × 100) − $50 credit). Upper breakeven is approximately $105.50.
Same stock, same short and upper strikes. The broken wing butterfly costs less to enter (a $50 credit instead of a $200 debit) and has zero downside risk below $95, but its upside loss ($450) is more than double the butterfly’s capped loss ($200) if the stock rallies hard through $110. The decision comes down to whether removing downside risk is worth carrying a larger, though still defined, upside loss.
Calculate the Payoff Before You Trade
Both strategies depend on the specific strikes and premiums you use, which change the exact cost, credit, and breakeven. Use the free calculators to model the numbers for your own position:
- Butterfly Spread Calculator – model the symmetric debit, breakevens, and max profit for your own strikes
- Broken Wing Butterfly Calculator – enter unequal wing widths to see the credit, both loss zones, and max profit
- Iron Butterfly Calculator – compare the four-leg, defined-risk-both-sides version built from puts and calls
- Iron Condor Calculator – see the wider profit zone alternative for a broader range-bound thesis
- Straddle Calculator – compare the payoff if your thesis is a large move in either direction instead