Broken Wing Butterfly: How Skipping a Strike Moves Your Risk to One Side in 2026

A broken wing butterfly is a butterfly spread with one wing deliberately wider than the other. You still buy one option, sell two at a middle strike and buy one more, all in the same expiration. The difference is that one of the outer strikes is pushed further away, which lowers the cost of the trade, often to almost nothing, and sometimes turns it into a small credit.

That lower cost is why traders like it, and it is also where most of the misunderstanding starts. The broken wing does not remove risk. It moves it. A standard butterfly loses the same small amount whichever way price escapes. A broken wing butterfly loses almost nothing on one side and noticeably more on the other. If you do not know which side that is before you enter, you have built a directional trade without meaning to.

In this guide we'll cover how a broken wing butterfly is built, how its payoff compares with a standard butterfly using one illustrative set of prices, when the trade makes sense and when it does not, the mistakes that cost the most, and how to size and manage one in a simulated funded options account where the daily loss limit, not the expiration diagram, decides how much you can lose today.

Key Takeaways

• Know where the risk went. Widening one wing cuts the cost of the butterfly, but the maximum loss grows on the broken side. Name that side before you enter.
• Treat it as a directional trade. A broken wing butterfly leans one way. A put version is usually placed below the market and is hurt most by a sharp fall through the far wing.
• Size from the worst case, not the debit. A trade that costs $10 can still lose $310 per contract in the illustrative example below. The worst case is the number your daily loss limit sees.
• Read the expiration diagram as a map, not a forecast. Before expiration, implied volatility and time decay move the value of the spread, so intraday profit and loss rarely match the diagram.
• Plan the exit before the entry. Decide in advance at what price you close if the underlying heads toward the broken wing, and write it down with the trade.

Table of Contents

• What is a broken wing butterfly?
• How the broken wing changes the payoff
• When a broken wing butterfly makes sense
• Mistakes that cost the most with broken wing butterflies
• Broken wing butterflies in a simulated funded options account

What is a broken wing butterfly?

A broken wing butterfly is a three-strike options spread in which the two outer strikes sit at unequal distances from the middle strike. It keeps the butterfly's shape, a peak of profit around the middle strike, but trades the symmetry of a standard butterfly for a lower entry cost and a lopsided risk profile.

Start with the standard butterfly

The Options Industry Council describes the long call butterfly as two short calls at a middle strike combined with one long call at a lower strike and one at a higher strike, all with the same expiration. Its definition includes a condition that matters here: the upper and lower strikes, the wings, must both be equidistant from the middle strike, the body. The same applies to the long put butterfly.

That equal spacing is what makes a standard butterfly symmetrical. If price finishes outside either wing at expiration, you lose the premium you paid, and that loss is the same on both sides. Our guide to butterfly spreads walks through the standard version leg by leg.

What breaking the wing does

A broken wing butterfly breaks exactly that rule. One wing stays close to the body. The other is moved further out, skipping one or more strikes. Traders sometimes call it a skip strike butterfly for that reason.

Because the far wing is further out of the money, it is cheaper to buy. You still collect the same premium for the two short options in the body, so the net cost of the whole position falls. Depending on the strikes, the time to expiration and the shape of implied volatility across strikes, the trade may cost a small debit, cost close to nothing, or bring in a small credit.

The price of that discount is a gap. Between the body and the far wing there is now more distance than the near wing covers. If the underlying moves all the way through that gap, the two short options lose more than the near wing can offset, and the far wing only stops the bleeding once price passes it. That is where the extra risk lives.

Call version and put version

A call broken wing butterfly uses calls, with the wider wing above the body. Its extra risk sits to the upside, so it is hurt most by a sharp rally through the far strike. A put broken wing butterfly uses puts, with the wider wing below the body. Its extra risk sits to the downside, so it is hurt most by a sharp drop.

Traders often place the put version below the current price, expecting the market to drift lower toward the body or simply hold, and treat it as a way to express a neutral to mildly bullish view while getting paid little or nothing to enter. The call version is the mirror image. Neither is safer by nature. Each has one bad direction, and you choose which one when you choose the strikes.

How the broken wing changes the payoff

The broken wing lowers the cost and raises the peak slightly, but it turns one of the small, capped losses of a standard butterfly into a much larger loss on the broken side. The clearest way to see this is to put the two trades on the same chart with the same prices.

The example below uses a hypothetical stock trading at $100 and put options about two weeks from expiration. The option prices are invented for illustration and are only meant to be plausible. Every option contract here represents 100 shares, as the SEC's introduction to options explains, so a $0.32 net price is $32 per spread.

Illustrative example · put butterflies at expiration

Same body, one wing moved

Hypothetical stock at $100. Both trades buy the 98 put and sell two 95 puts. The only change is the lower wing: 92 for the standard butterfly, 89 for the broken wing.

Standard 98 / 95 / 92 · $32 debit Broken wing 98 / 95 / 89 · $10 debit Where the risk moved

Stock price at expiration (bottom) · profit or loss per spread (left)

Cost to enter $32→$10 Cheaper far wing lowers the debit

Best case, at $95 $268→$290 Peak rises by the $22 saved

Worst case, below $89 $32→$310 The discount is paid for here

tradefundrr.com Illustrative example. Invented option prices, per one spread of 100-share contracts, at expiration, before commissions. Not a recommendation.

Reading the standard butterfly

In the illustrative prices, the 98 put costs $1.60, each 95 put pays $0.85 and the 92 put costs $0.42. Buying one 98 put, selling two 95 puts and buying one 92 put costs a net $0.32, or $32 per spread.

Above $98 at expiration, every put expires worthless and the $32 is lost. Below $92, the gains and losses on the four legs cancel out and the $32 is lost again. The best case is a finish right at $95, where the 98 put is worth $3, so the spread makes $300 minus the $32 paid, or $268. The breakevens are $97.68 and $92.32. Risk is small, capped and identical on both sides.

Reading the broken wing

Now replace the 92 put with the 89 put, which costs only $0.20 because it is further out of the money. The net cost falls to $0.10, or $10 per spread. Above $98, the loss is just that $10. At $95, the spread makes $290, slightly more than the standard version, because you paid less.

Below $95, the picture changes. With the protective put three strikes further away, the two short 95 puts lose faster than the long 98 put gains. The profit shrinks, crosses zero at $92.10 and keeps falling until price reaches $89, where the long 89 put finally starts to offset. From there down, the loss is fixed at $310 per spread: the $300 gap between the 92 and 89 strikes that the near wing does not cover, plus the $10 paid.

So the honest summary is this. You saved $22. In exchange, a sharp drop through $89 now costs $310 instead of $32. That is not a free improvement. It is a decision to accept a larger loss on one side in return for almost no loss on the other.

When a broken wing butterfly makes sense

A broken wing butterfly makes sense when you have a view about direction as well as about range: you expect price to drift toward the body or stay put, and you consider a sharp move through the far wing unlikely enough to accept a larger loss there. Without that second view, a standard butterfly is the more honest trade.

You have a lean, not just a range

A standard butterfly says "I think price ends near here." A put broken wing butterfly below the market says something more specific: "I think price ends near here or stays above it, and I am willing to lose more if it collapses." If you cannot finish that sentence with a reason, such as a level you trust below the body or a market that has been grinding higher, you do not have the view the trade requires.

You want little or no cost on the safe side

The main appeal of the structure is that the side you are less worried about costs almost nothing. In the example, if the stock simply rallies away, you lose $10 instead of $32. When the far wing is pushed out further or the volatility skew is steep, the trade can even be entered for a credit, which means a finish above the upper strike makes a small profit rather than a small loss. That is a real benefit, but it should be weighed against the size of the loss on the other side, not admired on its own.

When to choose something else

Skip the broken wing when you have no directional lean, when a large move in either direction is plausible, such as ahead of a scheduled event, or when the account's loss rules cannot absorb the worst case at the size you want. A two-leg vertical spread may express a simple directional view more cleanly. A standard butterfly expresses a pure range view with equal risk on both sides. The broken wing is neither, and that is fine only if it is what you meant.

The Options Industry Council notes that butterflies are generally hurt slightly by rising implied volatility, and that time decay usually helps when the body is at the money and hurts when it is away from the money. A broken wing inherits those traits, so the same trade can look very different on the screen depending on where price sits relative to the body and how much time is left.

Mistakes that cost the most with broken wing butterflies

The costly mistakes with broken wing butterflies come from treating a low entry price as low risk. Most of them are sizing errors, exit errors or a misreading of the diagram, and all of them can be prevented with a short checklist written before the order goes in.

Sizing off the debit

A trade that costs $10 feels small. Ten of them cost $100. But ten of the illustrative spreads above lose $3,100 if price falls through $89. The debit is not the risk; the maximum loss on the broken side is. Size every broken wing butterfly from that number, and compare it with how much you are prepared to lose in a day, not with how little the trade costs to open.

Forgetting which side is broken

It is easy to remember the trade as "the cheap butterfly" rather than "the butterfly that loses if the market drops." Write the bad direction in your trade plan in plain words, so a move that way is a scenario you planned for, not a discovery.

Waiting for expiration to fix it

The diagram shows outcomes at expiration. Before then, a move toward the broken wing usually shows up as a growing loss on the screen, and the temptation is to wait for price to come back to the body. Sometimes it does. When it does not, the loss can reach the maximum well before expiration day. Decide in advance at what underlying price or what dollar loss you close the whole spread.

Legging out under pressure

Closing one leg at a time to "save" part of the trade often leaves you holding naked short options or an unbalanced position at exactly the wrong moment. Close the spread as one order unless you have a specific, pre-planned reason to do otherwise.

Broken wing butterflies in a simulated funded options account

In a TradeFundrr simulated options account, broken wing butterflies fit within the supported strategies, but they are traded intraday against fixed loss rules. That changes how you size them and how you read them: the expiration diagram becomes a reference, and the daily loss limit becomes the number that matters.

What the account supports

The live TradeFundrr options program pages list outright long calls and puts, spreads, iron condors and butterflies as supported, with single-leg and multi-leg order entry on the platform. Credit-based positions are allowed up to account buying power, and accounts start with $25,000 in buying power. Trading is manual and intraday only, Monday through Friday, 9:30 AM to 3:55 PM ET, and each trade must be held for at least 15 seconds. A position limit also applies; it differs by program, so confirm the current figure in your own account terms.

Size from the daily loss limit

Both TradeFundrr options accounts have a $1,000 daily loss limit, and reaching it pauses trading for the rest of the session. There is also a $3,000 maximum drawdown that trails your highest end-of-day balance and closes the account if it is exceeded.

Put the illustrative trade next to those numbers. One spread has a worst case of $310 on the broken side. Three spreads put $930 at risk, nearly a full day's allowance in a single position. Four would exceed it. A more conservative plan might keep the worst case of any one position to a fraction of the daily limit, so that a single bad trade cannot end your session or take a large bite out of the drawdown cushion. Our comparison of iron butterflies and iron condors applies the same sizing logic to credit structures.

The diagram is not the trade you will hold

Because the account is intraday only, you will close the spread the same session you open it. Unless you are trading an option that expires that day, you will never see the expiration payoff. What you see instead is the spread's current market value, which depends on how far price has moved, how much time is left and what implied volatility is doing. A move toward the broken wing will show a loss well before price reaches the far strike, and a move toward the body will show a gain that is usually much smaller than the peak of the diagram.

That is how butterflies behave before expiration, and it is the main reason to practice them in a simulated environment, where you can watch the value respond over a session without your own money on the line.

Assignment is a live-market event

In a live account, the short options in the body of a butterfly can be assigned, and the Options Industry Council describes butterflies as carrying extremely high expiration risk because you cannot know for sure which short options will be exercised. In a simulated funded account no real trade is executed, so no real counterparty exercises against you and no real shares are delivered. Positions in the TradeFundrr accounts are intraday, and the platform handles how open positions are treated under the account rules.

Understanding assignment still matters. It is part of what you would face trading your own money in a live account, and knowing why the body of a butterfly carries that risk is a live-ready skill the simulation is there to help you build.

The honest limit

A broken wing butterfly reshapes risk you choose to take. It is not an edge on its own, and in the scenario where you are most wrong, it loses more than the symmetrical version. If you do not yet have a reliable way to judge where price is likely to stay, practice the standard butterfly and simple spreads first.

Frequently Asked Questions

What is a broken wing butterfly?

A broken wing butterfly is a butterfly spread whose outer strikes sit at unequal distances from the middle strike. Moving one wing further out lowers the cost of the trade, sometimes to a credit, but increases the maximum loss on that side. The result is a range trade with a directional lean.

Is a broken wing butterfly a debit or a credit trade?

It can be either. Depending on the strikes, the time to expiration and the volatility skew, a broken wing butterfly may cost a small debit, cost almost nothing or bring in a small credit. Whatever it costs to enter, the maximum loss on the broken side is usually much larger than the entry price.

What is the maximum loss on a broken wing butterfly?

On the broken side, the maximum loss is the extra width of the far wing beyond the near wing, times 100 shares, plus any debit paid or minus any credit received. In the illustrative example, a 3-point gap and a $10 debit give a maximum loss of $310 per spread.

Is a broken wing butterfly riskier than a regular butterfly?

On one side, yes. A regular butterfly loses the same small premium whichever way price escapes. A broken wing butterfly loses less on one side and more on the other. It is not riskier overall in every case, but it concentrates risk in one direction, which you must choose deliberately.

Can I trade broken wing butterflies in a TradeFundrr options account?

The live TradeFundrr options pages list spreads and butterflies as supported strategies, with multi-leg order entry. Trading is manual and intraday only, within the account's buying power, position limit and loss rules. Confirm current terms for your program before trading.

How many broken wing butterflies can I trade under a $1,000 daily loss limit?

Divide your planned worst-case loss for the day by the maximum loss per spread. With a $310 worst case per spread, three spreads risk $930, nearly the whole limit. Most traders keep a single position's worst case well below the daily limit, and the account's position limit also applies.

Does assignment risk apply to a broken wing butterfly in a simulated account?

Not in the live sense. In a simulated funded account no real trade is executed, so no counterparty exercises and no shares are delivered. Assignment is a live-market event worth understanding, because it applies when you trade your own money in a live brokerage account.

Should beginners trade broken wing butterflies?

Usually not first. The structure combines a range view, a directional lean and an uneven risk profile, which makes it easy to misjudge. Most traders are better served by learning vertical spreads and standard butterflies before adding a broken wing.