Broken Wing Butterfly

A broken wing butterfly is an asymmetric variation of the traditional butterfly spread that uses unequal wing widths to create a net credit position while maintaining limited risk characteristics on one side. This sophisticated strategy involves deliberately creating unequal distances between the long and short strikes, allowing traders to collect premium upfront while still benefiting from limited risk exposure. The broken wing structure is particularly effective when traders have a slight directional bias but still want to profit from sideways movement and volatility compression. Professional traders use this strategy to enhance income generation while maintaining defined risk parameters, making it superior to traditional butterflies in many market conditions. The asymmetric design allows for better risk-adjusted returns and more flexible position management

If NIFTY is at ₹25,800, set up: Buy ₹25,600 Call for ₹95, Sell two ₹25,800 Calls for ₹120 each, Buy ₹26,200 Call for ₹55, creating ₹70 net credit with limited risk below ₹25,600 and maximum profit of ₹270 if NIFTY closes between ₹25,800-₹26,200.