Put Broken Wing Butterfly Calculator

Put Broken Wing Butterfly at a glance

How a put broken wing butterfly works

The put broken wing butterfly mirrors its call cousin on the downside. Starting at the money, you buy one put, sell two puts two strikes lower and buy protection five strikes lower, skipping strikes on the bottom wing. The far put is cheap, so the trade costs little and can even pay a credit. Traders also place the whole structure below the current price for a credit and treat it as a neutral to bullish trade, since nothing is lost if the stock simply rises.

At expiration, above the upper strike all puts expire worthless, so you lose the debit or keep the credit. As the stock falls from the upper strike to the short strike, the long put gains, and profit peaks at the short strike at the upper wing width minus the debit, or plus the credit. Below the short strike, the two short puts claw back gains until the lowest put begins to offset them, and under the bottom strike the loss stays flat.

Before expiration, the position starts with negative delta, since the long at the money put dominates, and that delta shrinks as the stock approaches the short strike and turns positive below it. Time decay helps most when the stock is near the short strikes. Implied volatility often rises during a decline, which works against the short puts and can hold down the position's value even as the stock moves toward the target, so the payoff tends to arrive late in the cycle.

Put Broken Wing Butterfly example with real numbers

With the stock at $100, implied volatility at 30%, a 4.1% risk free rate and no dividend, you would buy 1 100 put (32 days) at $3.39, sell 2 95 puts (32 days) at $1.43, buy 1 87.5 put (32 days) at $0.22. That is a net debit of $75. At expiration a maximum profit of $425 and a maximum loss of $325, with breakevens at $90.75 and $99.25. The lognormal chance of profit is 33%.

These are theoretical American option prices from the Bjerksund and Stensland model, not live quotes. Load any ticker in the put broken wing butterfly calculator above to run the same math on real market prices.

When to use a put broken wing butterfly

• You expect a moderate decline to a specific target near the short strike.
• You want a bearish butterfly with little or no risk if the stock rises instead.
• Implied volatility is high and you expect it to settle as the stock drifts lower.
• You accept a defined loss if the stock falls far below the target.

Max profit, max loss and breakeven

Maximum profit

(Upper strike minus short strike minus net debit) × 100, or (upper strike minus short strike plus net credit) × 100 if opened for a credit. It is reached if the stock closes exactly at the short strike at expiration.

Maximum loss

On the downside: ((short strike minus lowest strike) minus (upper strike minus short strike) plus net debit) × 100, or minus the net credit if opened for a credit. On the upside the loss is only the net debit, and zero if the trade opened for a credit.

Breakeven

Upper breakeven = upper strike minus net debit; if the trade opened for a credit, there is no upper breakeven. Lower breakeven = short strike minus the maximum profit per share.

Put Broken Wing Butterfly Greeks

• Delta: Negative while the stock is above the short strike, shrinking toward zero at the short strike and turning positive below it.
• Gamma: Positive near the upper long put and negative around the short strike, where the two short puts dominate.
• Theta: Small at entry and increasingly positive as the stock approaches the short strike.
• Vega: Generally negative once the stock nears the short strike, so falling implied volatility helps there.

See the live numbers for your position in the Greeks tab of the calculator, or explore a single option in the options Greeks calculator.

Early exercise and assignment risk

The two short puts carry the American style risk. After a decline that pushes them deep in the money, their time value can disappear and holders may exercise early, especially when interest rates are high and expiration is near. One assignment leaves you long 100 shares, which the at the money long put covers. A second assignment adds another 100 shares that are covered only by the lowest put, three strikes below the short strike, so the uncovered gap is exactly the broken wing risk you accepted at entry.

Unlike the call version, a put BWB is rarely exposed to dividend driven assignment, because put holders generally prefer to wait until after the ex dividend date for the stock to drop. Pin risk is the expiration hazard. With the stock near the short strike at the close, the upper long put will be exercised automatically while assignment on the two short puts is uncertain, so you could hold long, flat or short shares the next session. Closing the spread before the final hour avoids that.

The calculator's Early exercise risk tab flags short legs that are likely to be assigned. For a single option, use the early exercise calculator or read how early exercise and assignment work.

Pros and cons

How to manage a put broken wing butterfly

• Place the short strike at your downside target and check the downside risk in the calculator before entering.
• If the stock drops through the short strike quickly, consider rolling the short puts lower or closing before the loss zone is reached.
• Close as the stock approaches the short strike near expiration to lock in most of the gain.
• If one short put is assigned, sell the shares or exercise the long put, then reassess the remaining legs.

Put Broken Wing Butterfly FAQ

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Educational tool, not financial advice. Calculations are theoretical and depend on your inputs; real fills, fees, early assignment and dividends can change results. Options involve risk and are not suitable for every investor.