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Define: Broken Wing Butterfly Spread



Broken Wing Butterfly Spreads are butterfly spreads that transfers all the risk in one leg onto the other, resulting in a butterfly spread that loses money only when the stock breaks out in one direction instead of both directions.

This is achieved by buying out of the money options at a further distance from the middle strike price than the in the money options.

Eventhough loss can only be incurred in one direction, the maximum loss would be twice that of the loss of a normal butterfly spread.

Read the full tutorial on Broken Wing Butterfly Spreads.