Broken Wing Butterfly Spread

Learn Everything About How The Broken Wing Condor Spread Options Strategy Works

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Broken Wing Condor Spread - Introduction

The Broken Wing Condor Spread, also known as a Skip Strike Condor Spread, is neutral options strategy and is a variant of the Condor Spread options trading strategy. The Broken Wing Condor Spread is simply a Condor Spread which has risk inclined to one side. This means that rather than an equal risk when the stock breaks out to topside or downside, the Broken Wing Condor Spread transfers all the risk in one direction onto the other in order to create a options trading risk profile with limited loss when the stock goes either upwards or downwards and totally safe when the stock goes in the protected direction.

The Broken Wing Condor Spread also differs from the Condor Spread in that it is usually put on as a zero cost spread or credit spread.

Learning the Condor Spread first makes the Broken Wing Condor Spread options trading strategy easier to understand.

Broken Wing Condor Spread - Risk Adjusted Condor Spread

The main purpose of a Broken Wing Condor Spread options trading strategy is simply to adjust the risk profile of a regular Condor Spread. A regular Condor Spread makes a loss when the stock breaks out to either direction. A Broken Wing Condor Spread enables you to totally transfer the risk of one direction onto the other. This is useful when you wish to speculate on a stock being stagnant but that you are confident that if the stock should break out, it will do so only in a certain direction.

The Broken Wing Condor Spread options trading strategy does this by simply buying out of the money options with a further strike price from the short strike than the in the money leg. A regular Condor Spread would have both out of the money options and in the money options at an equidistance strike price from their short strikes.

Because the Broken Wing Condor Spread transfers the risk from the in the money side to the out of the money side, the Call Broken Wing Condor spread would have to be used to protect against the stock breaking downwards and the Put Broken Wing Condor Spread would have to be used to protect against the stock breaking upwards.

Here's a table summarizing the differences between a regular Condor Spread and the Broken Wing Condor Spread:

Regular Condor Spread	Broken Wing Condor Spread
Two long strikes at equidistance from short strikes	Out of the money strike is further from the short OTM strike
Debit Spread	Zero Cost or Credit Spread
Lower margin requirement	Higher margin requirement
Lower Maximum Loss/Profit	Higher Maximum Loss/Profit

Please click on the respective risk graph to learn about each variant of the Broken Wing Condor Spread.

    
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