Broken-Wing Put Butterfly Strategy
Buy a 0.35 Δ put, sell two puts width_pct below it and buy one put twice as far below again, for a credit: no upside risk. Take take_x × the credit, close if the price nears the lower wing, out at 14 days.
Default settings, 2020 to Nov 4, 2026.
By stock and year
Select a row to chart it below. Shade is the gap to buying and holding that stock.Defined risk by design: the long options in the structure cap the loss, so there is no separate hedged version.
| Stock | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 YTD | CAGR | B&H CAGR | Max drawdown |
|---|---|---|---|---|---|---|---|---|---|---|
| −14.6%−29.8 | +10.7%−16.2 | −34.8%−15.3 | +12.7%−11.6 | +9.3%−14.0 | +11.1%−5.2 | +1.3%−11.2 | −2.3% | +13.4% | −43.0% | |
| −11.5%−56.6 | +0.2%−26.6 | −27.9%+5.2 | +11.3%−42.5 | +3.7%−21.1 | +11.0%−9.2 | −4.5%−17.1 | −3.5% | +18.5% | −45.0% | |
| −10.5%−28.9 | +3.4%−9.8 | −26.7%−5.1 | +2.8%−12.3 | +11.4%+1.3 | −0.5%−11.9 | +11.8%−3.5 | −2.1% | +8.2% | −39.3% | |
| −0.6%−118.4 | −1.2%−126.4 | −7.6%+42.7 | +2.3%−236.6 | −11.0%−182.1 | −12.4%−51.2 | −17.4%−17.5 | −7.2% | +65.2% | −40.4% | |
| −9.6%−86.3 | −0.1%−34.0 | −21.5%+5.3 | +0.2%−48.0 | +9.0%−21.1 | −22.9%−31.5 | +10.1%−18.5 | −6.0% | +25.2% | −45.4% |
Growth of $10,000
Weekly closes on a log scale; the red shade is the strategy's drawdown from its last high. Returns are on the capital the strategy needed at its peak, with interest on idle cash. Hypothetical: how the backtests are made.
Rules · the when / do flow, read-only until you make a copyShow flow
The strategy runs as 1 track side by side. Each day, the first rule whose conditions hold in each track acts.
1. Butterfly
- INOpen the broken-wing butterfly for a credit
When:
book.open == 0Do: buy put (as p1)delta long_delta (0.35)dte dte (35)dte_min dte_min (25)dte_max dte_max (50)avoid_earnings 1strict 1; sell put (as s2)qty 2strike leg.p1.strike - spot * width_pctstrike_max leg.p1.strike - 0.001expiry leg.p1.expirystrict 1; buy put (as p3)strike_max leg.s2.strike - 0.001strike_min leg.s2.strike - 3 * (leg.p1.strike - leg.s2.strike)expiry leg.p1.expiryscan strike_descrequire 2 * leg.s2.cost - leg.p1.cost - new.cost > 0 and leg.s2.strike - new.strike >= 1.5 * (leg.p1.strike - leg.s2.strike) - TPtake_x × the credit made: close
When:
book.pnl_pct >= take_x * 100Do: close p1; close s2; close p3 - SLNear the lower wing: close
When:
spot <= (leg.s2.strike + leg.p3.strike) / 2Do: close p1; close s2; close p3 - EXexit_dte left: close
When:
leg.p1.dte <= exit_dteDo: close p1; close s2; close p3 - Closed or expired
When:
book.open == 0Do: nothing (hold)
Parameters and defaults
Every named number in the rules can be changed in the Rule Builder. These are the defaults the backtest used.
| Parameter | Default |
|---|---|
long_delta | 0.35 |
width_pct | 0.02 |
dte | 35 |
dte_min | 25 |
dte_max | 50 |
take_x | 3 |
exit_dte | 14 |
Make a copy to change any of it and run your own backtest.
Trade log · every open, roll, assignment and close for SPYShow trades
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Buy a 0.35 Δ put, sell two puts width_pct below it and buy one put twice as far below again, for a credit: no upside risk. Take take_x × the credit, close if the price nears the lower wing, out at 14 days.
What it is
About 35 days out, buy a 0.35 delta put, sell two puts 2% below it, and buy one put at least 1.5 times as far below again, for a net credit: there is no risk if the stock rises. Take three times the credit as profit, close if the price nears the lower wing, and close at 14 days left.
When to use it
Use it for a neutral-to-bullish view when you want a credit with no upside risk and a profit zone just below the price.
Maximum risk
No risk above. The most you can lose is the wider lower wing's width less the narrower one's, less the credit, if the stock ends at or below the lowest strike.
Questions
What is broken about the wing?
The lower wing is wider than the upper one. That turns the butterfly from a debit into a credit and moves all the risk to the downside.
Where does it make the most?
At the short strike at expiry: the upper wing's width plus the credit.
Why close near the lower wing?
That is where the loss grows; closing before keeps it well below the maximum.