Broken Wing Butterfly

Description

A butterfly spread variant where one wing is further than the other to eliminate risk in one direction.

Trading Logic

Uses asymmetrical strikes to eliminate risk in one direction while collecting premium.

Practical Example

Stock at $100. Buy $90C, sell two $100C, buy $115C.

P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss