Options Trading Secret: Constructing the Broken Wing Butterfly
In this video, I dive into the lesser-known yet highly effective "Broken Wing Butterfly" options strategy, which I've personally used with great success. Join me as I explain how to construct this multi-leg trade step-by-step using Robinhood.
The broken wing butterfly strategy is essentially a 1x3x2 ratio spread that can be broken down into two distinct options strategies combined as one:
Two Put Credit Spreads:
Short 25 delta put
Long 10 delta put
One Long Put Debit Spread:
Long 37 delta put
Short 25 delta put
When these components come together, you get a trade with no upside risk and the potential to make more money if the trade moves further to the downside. The maximum profit is achieved at the short 25 delta strike.
Key Highlights:
Detailed construction of the broken wing butterfly strategy on Robinhood
Combining put credit spreads and a long put debit spread for optimal results
Understanding the risk and reward dynamics
No upside risk and potential for higher profits on downside movement
Real-world examples and my personal experience with this strategy
Whether you're new to options trading or looking to expand your strategy toolkit, this video will provide you with valuable insights and practical steps to implement the broken wing butterfly strategy successfully.
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