Name: Broken Wing Butterfly w/ Calls

Setup: Buy (long) Strike A call and Sell (short) 2 Strike B calls and Buy (long) Strike D call

Bias: Slightly Bullish


Break-Even: Strike C + Credit received


Max Profit: Limited: Strike B – Strike A + Credit received

Max Loss: Limited: Strike C – Strike D – Credit received

Margin: Difference between strike prices of the short call spread

Time Decay: Time decay is your friend as you want all of your options to expire worthless except the call at Strike A

Implied Volatility: If the underlying is trading near or outside Strike A or Strike D you want implied volatility to increase.  This will increase the value of your options but also suggest a large move to get your towards Strike B.  If the underlying is trading near Strike B you want volatility to decrease.  Strike B is your max profit area so a move outside of this range would be a bad thing.

Notes: None at this time

Featured in Trade Review: None at this time