Broken Wing Butterfly Sensex: Setup, Payoff and Risk Guide
- August 25, 2026
- Posted by: Kunal Singla
- Category: Market
Sensex level used in this article: Rs 77,538 (as of 20 Aug 2026). Next weekly (Thursday) and monthly (last Thursday of the month) expiry: 27 August 2026 (Thursday). Lot size 10. Sensex retained its weekly expiry slot on BSE under SEBI’s one weekly index per exchange rule; Bankex and Sensex 50 weekly contracts were discontinued instead, in November 2024. Both weekly and monthly Sensex contracts remain available.
Quick Answer
The broken wing butterfly Sensex is a variation of the standard butterfly spread where the two wings are set at unequal distances from the centre strike, rather than the symmetric spacing used in a regular butterfly. With Sensex at Rs 77,538, this asymmetry allows the broken wing butterfly Sensex to be structured with little to no risk on one side of the trade, in exchange for a defined but potentially larger risk on the other side. The broken wing butterfly Sensex may be considered by traders who want a butterfly like payoff shape but with a directional lean and reduced or eliminated risk on the side they consider less likely.
In a standard butterfly, the distance from the centre strike to each outer wing is equal, producing a symmetric payoff with defined risk on both sides. The this strategy widens one wing relative to the other, which changes the net premium (often converting a net debit into a net credit or reducing it) and shifts the risk so that one side of the trade has little or no loss potential while the other retains a defined, if larger, maximum loss.
This makes the broken wing butterfly Sensex a hybrid between a standard butterfly and a directional credit spread, useful when a trader has both a range bound view and a mild directional lean on which side of that range is less likely to be breached.
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What Is the The position?
The broken wing butterfly Sensex uses three strikes and four option legs, similar to a standard butterfly, but with unequal spacing between the centre strike and each outer wing. It is most commonly constructed using calls.
The four legs of a call this trade are:
- Buy one call at the lower strike, closer to the centre strike (narrower inner wing)
- Sell two calls at the centre strike
- Buy one call at the higher strike, further from the centre strike (wider outer wing)
Because the outer wing is wider than the inner wing, the premium collected from selling the two centre calls more than offsets the cost of the two long calls in many cases, often resulting in the broken wing butterfly Sensex being entered for a net credit rather than the net debit typical of a standard butterfly.
How Does the This options approach Work?
With Sensex at Rs 77,538, a broken wing butterfly Sensex might use 77,100 as the narrower lower strike, 77,500 as the centre strike, and 78,300 as the wider upper strike. Because the gap between the centre and upper strike is wider than the gap between the lower and centre strike, the position has little to no risk below the lower strike, while retaining defined risk above the upper strike.
| Parameter | Details |
|---|---|
| Index | BSE Sensex (BSE) |
| Expiry | Weekly (every Thursday) and monthly (last Thursday of the month). Effective September 2025 (NSE and BSE index expiry swap). Sensex retained its weekly slot; Bankex and Sensex 50 lost theirs. |
| Lot Size | 10 units (effective from January 2026 per NSE circular, reduced from 15) |
| Strategy Type | Range bound with directional lean, asymmetric risk |
| Legs | 4 (1 long lower call, 2 short centre calls, 1 long higher call, unequal wing widths) |
| Max Profit | Realised at the centre strike; defined and calculable |
| Max Loss | Defined on the wider wing side; minimal or zero on the narrower wing side |
| Margin | Varies dynamically. Check live margin on your broker’s calculator before placing any order. |
The spread: Step by Step Setup
- Select the centre strike. With Sensex at Rs 77,538, a centre strike near the current level or at a level the trader expects the index to gravitate toward is used for the broken wing butterfly Sensex.
- Select the narrower wing strike. A strike closer to the centre, such as 77,100, is used on the side where the trader wants minimal or no risk.
- Select the wider wing strike. A strike further from the centre, such as 78,300, is used on the side where the trader is willing to accept defined risk for the this strategy.
- Calculate the net credit or debit. Because the wings are unequal, the broken wing butterfly Sensex often nets a credit or a smaller debit than a standard symmetric butterfly with the same centre strike.
- Confirm the risk is acceptable on the wider wing side. Before entry, calculate the maximum loss on the wider wing side of the the position and ensure it fits within your risk tolerance, since this is where the defined risk is concentrated.
Illustrative Payoff: Broken Wing Butterfly Sensex
Illustrative example for educational purposes only. Strikes and premiums are hypothetical and should not be interpreted as a trade recommendation.
Hypothetical setup: Buy 77,100 CE at Rs 210, sell two 77,500 CE at Rs 130 each, buy 78,300 CE at Rs 45. Net credit: Rs 5 per unit. Lot size: 10 units.
| Sensex at Expiry | P&L Per Lot (approx, Rs) | Outcome |
|---|---|---|
| At or below 77,100 | +50 (net credit retained) | Minimal to no additional loss below the narrower wing |
| 77,500 (centre strike) | +4,050 (max profit, illustrative) | Maximum profit zone of the broken wing butterfly |
| At or above 78,300 | Defined maximum loss (illustrative) | Wider wing side defines the maximum loss |
The broken wing butterfly Sensex illustrates the asymmetry clearly: the side with the narrower wing has little to no additional risk, while the side with the wider wing carries a defined but calculable maximum loss. This differs from a standard butterfly, where both sides carry equal, symmetric risk.
Greeks for the Broken Wing Butterfly Sensex
Delta: The broken wing butterfly Sensex carries a directional delta bias reflecting the asymmetric wing structure, unlike a standard butterfly which starts closer to delta neutral.
Gamma: The broken wing butterfly Sensex has negative gamma concentrated near the centre strike as expiry approaches, similar to a standard butterfly, but the asymmetry means gamma risk differs on each side.
Theta: Theta is generally positive for the broken wing butterfly Sensex near the centre strike, since the two short centre options decay faster than the two long wing options.
Vega: The broken wing butterfly Sensex is generally short vega near the centre strike, meaning a rise in implied volatility after entry tends to work against the position if the index is trading near that strike.
When the Broken Wing Butterfly Sensex May Be Considered
The broken wing butterfly Sensex may be considered when a trader has a range bound view on the index but also a mild lean on which side is less likely to be tested; wants to reduce or eliminate the net cost of a butterfly by accepting asymmetric risk; or is comfortable with a defined but potentially larger loss on one specific side of the trade.
When NOT to Use the Broken Wing Butterfly Sensex
Consider avoiding the broken wing butterfly Sensex when you have no directional lean and would prefer the symmetric risk of a standard butterfly; when the wider wing side represents a scenario you consider genuinely possible, since the maximum loss there can be larger than in a symmetric butterfly; or when you are not comfortable with a four leg structure that requires careful strike selection.
Risk Management
The broken wing butterfly Sensex has defined risk on the wider wing side, calculated at entry. Because the position is often entered for a small credit, the worst case scenario should be explicitly calculated and accepted before entry, rather than assumed to be minimal simply because the trade started with a credit. Many traders consider closing the broken wing butterfly Sensex early if the index approaches the wider wing strike.
Transaction Costs
The broken wing butterfly Sensex involves four option legs, which can mean meaningful cumulative transaction costs relative to the often small net credit or debit involved. Brokerage, exchange transaction charges, STT, GST, SEBI charges, stamp duty, and bid ask spread impact across four legs should be weighed carefully.
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Broken Wing Butterfly vs Other Sensex Neutral Strategies
| Strategy | Wing Symmetry | Risk Profile | Max Profit | Complexity |
|---|---|---|---|---|
| Broken Wing Butterfly | Asymmetric | Minimal on one side, defined on the other | Defined (at centre strike) | High |
| Standard Butterfly | Symmetric | Defined and equal on both sides | Defined (at centre strike) | Medium High |
| Iron Condor | Symmetric (wide plateau) | Defined on both sides | Defined (net credit) | Medium |
The broken wing butterfly Sensex trades the symmetric risk of a standard butterfly for an asymmetric structure that can reduce net cost, provided the trader is comfortable with the specific risk concentrated on the wider wing side.
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Conclusion
The broken wing butterfly Sensex offers a way to combine a range bound view with a directional lean, often reducing net cost compared to a standard butterfly by accepting asymmetric risk between the two wings. Always verify current lot size (10 units from January 2026) and expiry schedule before executing any trade, and consult a SEBI registered investment advisor if you are new to multi leg options strategies.
Disclaimer: Data and figures in this article are sourced from publicly available information and may or may not be accurate. All examples are illustrative and hypothetical only. Please verify all data including contract specifications, lot sizes, and expiry schedules with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
Frequently Asked Questions
What is the broken wing butterfly Sensex?
Ans. The broken wing butterfly Sensex is a variation of the standard butterfly spread with unequal wing widths, creating an asymmetric payoff with minimal risk on one side and defined risk on the other. It often nets a credit rather than the debit typical of a standard butterfly.
How does the broken wing butterfly Sensex differ from a standard butterfly?
Ans. A standard butterfly uses equal distances between the centre strike and each outer wing, producing symmetric risk. The broken wing butterfly Sensex uses unequal distances, concentrating defined risk on one side while minimising or eliminating risk on the other.
What is the maximum loss in the broken wing butterfly Sensex?
Ans. The maximum loss is concentrated on the wider wing side and should be calculated explicitly at entry, since it can be larger in absolute terms than the maximum loss on a comparable symmetric butterfly.
Can the broken wing butterfly Sensex be entered for a net credit?
Ans. Yes, because the wider wing reduces the cost of the long option on that side relative to the premium collected from the short centre options, the broken wing butterfly Sensex can often be structured for a net credit.
What is the current lot size for Sensex options?
Ans. The Sensex lot size is 10 units effective from January 2026, reduced from 15. Always verify the current lot size on bseindia.com (or nseindia.com for cross reference) before placing any order.
Is the broken wing butterfly Sensex suitable for beginners?
Ans. The broken wing butterfly Sensex involves four legs and asymmetric strike selection, making it generally unsuitable for beginners. It is better suited to traders who already understand standard butterfly spreads and want to explore asymmetric risk structures.
