0DTE Strategy Guide: Broken Wing Butterfly
The broken wing butterfly offers defined-risk income with a directional lean. Learn how this asymmetric strategy creates a credit while skewing risk to one side.
The broken wing butterfly is a variation of the standard butterfly where one wing is wider than the other. This creates a directional lean while still defining your risk. In 0DTE, it is used to collect premium with a built-in bias.
Basic Structure
- Legs (put broken wing example): Buy 1 OTM put (far wing) + Sell 2 puts at a middle strike + Buy 1 closer-to-ATM put
- Risk type: Defined risk on the upside, potentially defined or slightly exposed on the skewed side (depending on structure)
- Directional bias: Skewed — typically placed for credit with one side having more risk than the other
- Income: Can be entered for a small net credit
How It Works
SPY is at $580. You structure a put broken wing butterfly: Buy the $575 put, Sell 2x $578 puts, Buy the $580 put. The uneven wing widths ($5 vs $2) create a credit entry. Maximum profit occurs if SPY closes at $578. Risk is defined but asymmetric.
Best Market Conditions
- Mildly directional days: When you have a slight bullish or bearish bias
- Post-move consolidation: After a morning move establishes direction
- Moderate IV: Enough premium to create a favorable credit
Greeks Exposure
| Greek | Exposure | What It Means |
|---|---|---|
| Delta | Slightly directional | The skew creates a natural lean |
| Gamma | Moderate negative near the short strikes | Sensitive to moves around the sold strikes |
| Theta | Positive (+) near the short strikes | Benefits from time decay when near the middle |
| Vega | Negative (-) overall | Benefits from IV contraction |
Why Traders Use It in 0DTE
The broken wing butterfly lets traders express a directional view while collecting premium. Unlike a symmetric butterfly, the broken wing can be entered for a credit, meaning even if the underlying moves away from the profit zone, the loss can be zero on one side.
Primary Risk Factors
- Complex structure: Three different strikes make this harder to manage and close
- Asymmetric risk: Risk is higher on the skewed side — know which direction has more exposure
- Execution: Three legs mean wider effective spreads. Use a single-order to price the whole structure
- Pin risk: If SPY closes near the short strikes, partial assignments can complicate the position
Exit Management for 0DTE
- Close at 50% of max profit or if the underlying moves toward the wide wing
- This is a "set it and monitor" strategy — avoid constant adjustments
- If the position moves to max loss territory, close rather than hoping for a reversal
Safety Rating
Defined risk — intermediate complexity. The risk is defined but the asymmetric structure requires understanding which side carries more exposure. Best for traders with some spread experience.
This content is for educational purposes only and does not constitute financial advice. Options trading involves substantial risk of loss.