quest of a broken-wing butterfly dear sophie, congratulations on making the pit orchestra for the spring wizard of oz concert! I know how excited you must be and should be very impressive to have made it as a freshman! We should make the story clear to your cousins, jake and lauren it is such a good example.
broken wing butterfly spreads are a mutated form of normal butterfly spreads. Other than normal butterflies, the broken wing butterfly option trading strategy can even be used for high probability trading.
Butterflies, condors and broken wings russell rhoads, cfa instructor the options institute 2010 chicago board options exchange, incorporated.
Evolution of the broken-wing butterfly (bwb) i guess you could say that the broken-wing butterfly (bwb) was the next evolutionary step in the trading environment because a typical butterfly comes with two distinct drawbacks you have to enter it with a debit from your account, and it requires little movement in the underlying to make money.
A call broken-wing butterfly spread is an advanced bearish option strategy with the goal of having no downside risk. Call broken-wing butterflies consist of buying one in-the-money long call, selling two out-of-the-money short calls, and buying one out-of-the-money long call above the short calls.
Broken wing butterfly (bwb) with the highest strike placed behind the market (figure 1). For example, if the spx was at 2000, the bwb might be placed at 197519301875. That is long a 1975 put, short two 1930 puts, and long an 1875 put. Notice that the distance between the 19 is 45 and the distance between the 19 is 55.
for a bullish broken wing butterfly, i would enter when rsi hits 20. Be careful not to get the bullish and bearish broken wing butterflies confused. On a bearish broken wing butterfly, the profit zone is on the upside, but it is actually a bearish trade with negative delta.
the broken-wing butterfly not only sounds coolits pretty damn effective. As you might already know, traditional butterflies are greathowever they do have their draw- downs. For example, once a stock reaches the middle strikes it becomes a market neutral tradeand then a waiting game.