Strategy Greeks

Broken Wing Butterfly: Greek Profile

A broken wing butterfly is a skewed butterfly — often entered for a credit — that keeps the positive Theta and short Vega of a normal butterfly while shifting the risk entirely to one side by widening the far wing.

Quick answer: A broken wing butterfly is a skewed butterfly — often entered for a credit — that keeps the positive Theta and short Vega of a normal butterfly while shifting the risk entirely to one side by widening the far wing.

Simple explanation

A broken wing butterfly is a butterfly with unequal wings: one wing is placed further out than the other. Widening the far wing lets you enter for a net credit (or near-zero cost) and pushes all the risk to one side, so the other side can have no loss at all. Around the body it behaves like a normal long butterfly — positive Theta, short Gamma and short Vega — but the asymmetry means one direction is a free ride and the other carries the defined (but larger) risk. It is a directional-lean pin bet with a built-in margin of safety on one side.

Visual

Broken Wing Butterfly: Greek Profile

The broken wing butterfly peaks near the 24,600 body and, thanks to the widened upper wing, is designed so the downside carries no loss (often a small credit) while the defined risk sits on the upside beyond 25,000.

Detailed explanation

Delta: a deliberate directional lean

Unlike a symmetric butterfly, a broken wing butterfly is intentionally not Delta-neutral. Skewing the wings tilts the body off-centre relative to the risk, giving the position a directional bias toward the side you widened. A call broken wing with the wide wing on top typically leans slightly bearish-to-neutral, designed so the no-risk side is where you least fear a move. You choose the lean when you choose which wing to widen.

Gamma: short near the body, capped by the long wings

As with any long butterfly, the two short body options make the position short Gamma around the centre — a move off the body accelerates against you. The two long wings cap the loss on both ends. The difference is that the widened wing sits further away, so the short-Gamma zone is lopsided: the risk builds only as Nifty approaches the narrow-wing side, while the wide-wing side is engineered to stay safe.

Theta: positive near the body

Because you are net short the body options, the structure earns positive Theta when Nifty sits near the centre strike, just like a standard butterfly. If it was entered for a credit, that credit is yours to keep if price stays on the safe side — time decay and the credit combine so the trade can profit even without a perfect pin, as long as Nifty avoids the risk wing.

Vega: short near the body

The ATM-ish body options carry the most Vega, so a broken wing butterfly centred near the money is net short Vega: a rise in India VIX hurts and a fall helps the payoff converge. Like the plain butterfly, it is best entered when IV is elevated and expected to drop. The credit-entry version is especially attractive in high IV, because you are paid to take on the short-Vega, short-Gamma body while keeping one side risk-free.

Net Greeks of the broken wing butterfly

Greek	Position	What it means
Delta	Deliberate lean	Skewed wings give an intentional directional bias toward the widened side
Gamma	Short at body (lopsided)	Short Gamma builds toward the narrow-wing risk side; the wide-wing side is engineered safe
Theta	Positive near the body	Body decays in your favour; any entry credit adds to the profit if price stays safe
Vega	Short near the body	Rising India VIX hurts; best entered in high, falling IV, ideally for a credit

Practical example (Nifty)

Illustrative — Nifty spot 24500, lot size 75

Nifty at 24,500, monthly expiry. You buy the 24,400 CE (₹230), sell two 24,600 CE (₹130 each = ₹260), and buy a widened 25,000 CE (₹45). Net = −230 + 260 − 45 = a ₹15 credit per share = ₹15 × 75 = ₹1,125 collected up front. If Nifty stays at or below 24,600, the whole structure expires with you keeping at least the credit — the downside is a free ride, helped by positive Theta and short Vega. The peak payoff sits near the 24,600 body. The defined risk lives only on the upside: if Nifty pushes toward 25,000, the narrow-wing short Gamma bites, though the 25,000 long caps the maximum loss. You have paid for that risk-free downside by widening the top wing.

Why it matters in practice

Widening one wing lets you enter for a credit and make one direction completely risk-free.
It keeps the positive Theta and short Vega of a butterfly but adds a deliberate directional lean.
All the defined risk sits on the narrow-wing side — put that side where you least expect Nifty to go.
Best entered in elevated, falling IV and ideally for a credit, so decay and volatility both help.

Common mistakes

Placing the risk (narrow-wing) side in the direction Nifty is actually likely to move — defeating the safety design.
Forgetting the trade is short Vega near the body and entering in low IV that then expands against it.
Treating the entry credit as pure profit and ignoring the larger defined loss on the risk side.
Misjudging the directional lean and being caught offside because a broken wing is not Delta-neutral.

Professional usage

Professionals reach for a broken wing butterfly when they want a butterfly's cheap, high-payoff pin exposure but also a margin of safety on the side they fear less. They enter for a credit in high IV so time decay and a volatility drop both work, place the defined-risk wing away from their expected direction, and manage the position by closing once decay has captured most of the credit rather than risking the narrow-wing Gamma into expiry. It is a refined, asymmetric evolution of the standard butterfly.

Key takeaway

A broken wing butterfly is a skewed, often credit-entered butterfly: it keeps positive Theta and short Vega near the body while widening one wing to make a chosen direction risk-free, concentrating all the defined risk on the other side.

Frequently asked questions

What are the net Greeks of a broken wing butterfly?

Near the body it is positive Theta with short Gamma and short Vega, like a normal butterfly, but with a deliberate directional Delta lean from the skewed wings.

How is a broken wing butterfly different from a normal butterfly?

One wing is placed further out than the other. This asymmetry usually lets you enter for a credit and makes one direction risk-free, while concentrating the defined risk on the other side.

Why can a broken wing butterfly be entered for a credit?

Widening the far wing reduces its cost, so the premium collected from the two short body options can exceed the total paid for the two long wings, leaving a net credit.

Which side carries the risk in a broken wing butterfly?

The narrow-wing side. The defined maximum loss sits there, while the widened-wing side is engineered to have no loss — often keeping the entry credit.

When should I trade a broken wing butterfly?

When you have a mild directional lean and expect Nifty to pin near the body, with implied volatility high and likely to fall, since the body is short Vega.

Is a broken wing butterfly Delta-neutral?

No. Unlike a symmetric butterfly, the skewed wings give it an intentional directional bias toward the side you widened, so it carries a deliberate net Delta.

How do I place the wings on a broken wing butterfly?

Widen the wing on the side you least expect Nifty to move toward, so the risk-free side faces the likely direction and the defined risk sits where a move is improbable.

Sources & references

Last reviewed 7 July 2026. Educational content only — not investment advice.