Video summary
The video demonstrates how to construct and compare broken wing butterfly spreads using the Flux trading platform, specifically focusing on the difference between put and call structures. The presenter begins by creating a standard put butterfly below the current price by selecting specific strike prices, which can then be manually adjusted by clicking and dragging to form a broken wing configuration. Similarly, a call butterfly is established above the price, and its strikes are also modified to create a broken wing version. By combining these two distinct structures, the trader creates a complex multi-leg strategy that allows for analysis of both downside protection via puts and upside potential via calls within a single view.
To facilitate a deeper analysis, the tutorial highlights a specific feature called "compare mode," which overlays the graphs of different spreads rather than merging them into a single combined structure. When this toggle is activated, the put butterfly appears as a solid green line while the call butterfly is displayed as a dashed blue line, allowing traders to visually inspect each strategy individually against the other. The interface also displays various reference lines, such as expiration dates and current profit levels (T0), which can be toggled on or off to keep the chart clean during comparison. This visual layering helps traders evaluate how different strike selections impact the overall shape and risk profile of their positions before committing to a trade.
The presenter explains that choosing between put and call broken wings often depends on where the trader expects the profit peak to occur and their view on market direction. For instance, if a trader anticipates a decline in price, they might prefer puts because they are out-of-the-money, offering no risk to the upside while positioning the profit peak below the current price. Conversely, if the goal is to capture upside movement with no downside risk, call broken wings can be adjusted to achieve this outcome, although the presenter notes that call spreads typically cost more and require slightly different adjustments to eliminate downside risk effectively.
Ultimately, the video concludes by emphasizing the value of Flux's visual tools in helping traders make informed decisions based on their specific market outlooks. By manipulating strike prices and utilizing the overlay comparison feature, traders can experiment with various scenarios to see how price movements might affect their strategies from both individual and combined perspectives. The presenter encourages viewers to use this free tool available to all members to refine their approach, ensuring they select the structure that best aligns with their expectations of where the market will go before executing the trade.
Read the full video transcript
Hey everyone, I want to share with you
how I compare broken wing butterflies.
Now you can compare any spread that you
want,
but this will be a good example of of a
broken wing butterfly. So, looking at
the flux analyzer,
I'll start with a a put butterfly. So,
I'm just going to click below the price
and click on butterfly. That's
automatically going to populate a put
butterfly. I can click and drag these
strikes and now I've got a put broken
wing butterfly. Uh and then if I want to
compare that to another broken wing
butterfly, let's say a a call butterfly
above price, I'm going to click here
and click butterfly. And now I've got a
call butterfly as well. So, there's my
put butterfly.
There is my call butterfly. I'm going to
change the strikes here as well to make
this into a broken wing fly.
I can do that by either
changing the strikes down here or I can
just click and drag, which makes it
pretty easy. So, then if I combine
those,
this is what my structure looks like.
You've got the put butterfly below, the
call broken wing butterfly above, and so
from a combined standpoint, that's what
the that's what the trade looks like.
Now,
what if I want to compare the two?
That's where this gets pretty cool is
there's a a toggle right here where it's
currently on combined, but if I click
compare, it's going to draw both graphs
over each other. They're overlaid
instead of combined, so you can kind of
look at both. So, the put butterfly is
the first one I put on and so that's in
the solid green and then the call fly is
the dashed blue line that you see there
and you can see they're overlaid. Uh
now, if you have a multiple spreads that
you're comparing, the lines can get a
little little busy because you've got
the expiration lines that you see here.
And then you've also got a T0 line,
which is this uh more dotted line. That
That is the T0 line for the call fly.
And then the pink line is the T0, the
current profit line for the put
butterfly. I can also take those off and
just look at expiration. Kind of cleans
up the graph and makes it makes it look
a little cleaner while you're doing the
comparison. You can always put the T0s
back on if you want.
Uh but this is This is what compare mode
would look like. So, you can overlay
different spreads to look at each
individually overlaid over the other
one. And then of course, if you decide
you want to combine them, you can you
can uh view the combined as well. And
then when you combine, obviously, it's
going to give you just one T0 line, one
current profit line because they are
looked at now as one uh combo spread.
Okay? So, that's uh that's one way to to
compare broken-wing butterflies. Uh
sometimes I like to have my profit peak
below the current price, so I would use
puts because they are out of the money.
Um and then I have, you know, no risk to
the upside from that standpoint. Uh
sometimes I may want my profit peak to
the upside, and I could break this wing
to a point of being able to get no risk
to the downside as well.
Um as you'll notice,
the uh the call uh the call flies are
going to be
uh more expensive. And so, you have to
work those a little bit differently to
get that no risk. That's pretty close
right there.
Uh and then again, um you know, as
you're as you're kind of visually I'm a
very visual trader. So, being able to
visually just kind of move these strikes
around to where I want them based on,
you know, where I think price might go
or where I think price won't go and then
uh and then using the the compare
feature to overlay them and and figure
out if I like one of those or both of
those or how that would look from a
comparison standpoint, how that would
look from a combined standpoint. Uh Flux
does a really good job on this tool of
giving you that visual perspective so
that you can make those decisions
uh on a more informed basis. So, hope
that was helpful. Uh if you have any
questions, let me know in the comments
below. Uh but this is a Flux tool that's
available to all of our members at no
additional cost. Have a good one. Talk
to you soon.