June 8, 2020

How to Calculate Profit and Loss for a Broken Wing Butterfly

When a new trader hears the term “broken wing butterfly” it tends to send shivers down his or her spine.  The term sounds really complicated.  

It does not have to be.  If you break down the components of a bwf, you will see that it is simply buying one vertical spread and selling a narrower vertical spread against it.

Click the video below to see how we break down the profit and loss effects in our position in PayPal (Ticker: PYPL).

Follow me on Twitter @CboeSib

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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