Broken-Wing Put Butterfly Calculator

A broken-wing put butterfly is a put butterfly with the lower wing moved further out, which turns it into a position that can be entered for a credit. Below the current price it has a profit tent like any butterfly; above the price it keeps the credit; the extra width on the lower side is where the risk sits.

When it is used

Traders place it below the current price on a stock they are mildly bullish or neutral on, so that the most likely outcome, the stock holding or rising, keeps the credit, while a modest decline into the tent pays more. It is a popular income structure because there is no risk on the upside when it is entered for a credit.

How it makes and loses money

Time decay helps throughout, most of all when the stock is inside the tent in the final weeks. A sharp fall through the lower wing is the loss, capped at the width difference minus the credit. Rising implied volatility hurts a little because the position is net short options.

What to check in the grid

Look at the rows below the lower long put: that is the only region with a loss, and the summary reports it as the max risk. Then compare the tent on the expiry column with the earlier columns to see how little of the extra profit is available before the end.