December 2, 2019

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:

Scott Bauer

A respected market commentator seen on Bloomberg, Fox Business, CNBC and other major financial networks, Scott Bauer has 25 plus years of professional equity and index options experience at the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) and as a Vice-President/trader for Goldman Sachs. Scott graduated with Honors from the University of Illinois Business School and has taught classes both at his alma mater and at the CBOE.

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Coach’s Roundtable: Stock Market Indexes & Trading Fixes

Every week, the coaches at Prosper Trading Academy offer their insight on some of the most challenging questions covering recent stock market developments, trading tips, and relevant news stories. This week, Scott Bauer, Charlie Moon, and Mike Shorr touch on the best stock market indexes to follow and common issues they notice among struggling traders. […]

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