--- title: "Butterfly and broken wing butterfly on Nifty, explained" description: "Call butterfly and broken wing butterfly on dated NSE Nifty chains: cost, breakevens, maximum gain and loss, and why a tall payoff means a narrow band." source_url: "https://www.rupeecase.com/learn/path-17/module-17-8-butterflies" --- [Path 17 8 of 23](/learn/path-17/)Butterflies and broken wing butterflies[Next 17.9](/learn/path-17/module-17-9-option-calendar-spreads) Tuesday 16 Jun 2026. The June Nifty future settled at 24,001.00. A call butterfly on the 23,800, 24,000 and 24,200 strikes cost Rs 1,800 a lot and could pay Rs 11,200, 6.2 times its cost. On Tuesday 30 Jun Nifty closed at 23,865.75, and it made Rs 2,473. Run the same shape on Wednesday 10 Jun and the index ran off the top of it: the butterfly lost its whole Rs 1,359. The broken wing version, built so that a fall cannot hurt, lost Rs 5,259 by the same 30 Jun close. That is the lesson. A butterfly is a bet on where the index finishes, not on where it goes. Every figure is an NSE end of day settlement, dated, so nothing is live and nothing says where Nifty goes next. 3By the end you can 1. Build a call butterfly and a broken wing butterfly from settlement prices and read the debit or credit, breakevens, maximum gain and maximum loss. 2. Explain why a tall payoff over a narrow band is cheap, and how to read the chance of landing in the band. 3. Say where the risk of a broken wing sits and why it is not removed. Watch in the terminal: which numbers am I looking at? A short tutorial on sample data. ## The idea, plainly A butterfly is a tent. You pay a little for a payoff that peaks at one strike and falls to nothing a fixed distance either side. The tent is narrow, so it is cheap, and its peak is tall against the price. The catch is the odds of landing under the tent. ### What is a long call butterfly? Three strikes, equal gaps, one expiry. Buy a call at the lower strike. Sell two calls at the middle strike. Buy a call at the upper strike. It is two vertical spreads stacked: a bull call spread and a bear call spread that share the middle strike ([module F26](/learn/path-17/module-17-2-bull-call-and-bear-put-spreads) builds the first). You pay a net debit. The debit is the most you can lose, and you lose it if the index ends at or beyond either outer strike. The most you can make is the strike gap less the debit, and you make it only if the index ends exactly on the middle strike. Call butterfly Max loss = net debit Max gain = gap − debit Breakevens = lower + debit, upper − debit A butterfly is two vertical spreads that share the middle strike Settlement prices of 16 Jun 2026, expiry 30 Jun 2026, one lot. Source: NSE end of day data, computed by RupeeCase. As of 16 Jun 2026. The butterfly is a tent: it pays only when the index ends near the middle strike Buy the 23,800 call, sell two 24,000 calls, buy the 24,200 call, one lot, expiry 30 Jun 2026. The straight line is the payoff at expiry. The smoother curve is the same position seven days earlier, priced with Black 76. Source: NSE end of day data, computed by RupeeCase. As of 16 Jun 2026. Read one more paragraph, 40 words The smooth curve is the lesson of the chart. A week before expiry the tent is low and round, and it only sharpens as time runs out. The full peak is a prize for the last day, not the first. ### Why is it cheap, and what is the price of that? It is cheap because it pays only in a narrow band. The debit was 27.70 a unit. Between the two breakevens, 23,827.70 and 24,172.30, the position gains. That band is 345 points wide. The straddle on the same chain implies a one standard deviation move of about 568 points over the same fortnight, so the band is a fraction of an ordinary move. Treat the index at expiry as lognormal at the market's own implied volatility, and the chance of finishing inside the band comes out under one in four. A tall payoff over a small chance is how any fair bet looks. It is a price, not a loophole. A week in, an unmoved index pays more when volatility falls and less when it rises | Move in the future | 7 days after the example date, rupees | | --- | --- | | IV −3 | IV same | IV +3 | | −2% | −680 | −435 | −422 | | −1% | +791 | +407 | +74 | | 0% | +1,495 | +713 | +226 | | +1% | +528 | +231 | −48 | | +2% | −878 | −626 | −581 | Green is profit and red is loss; deeper colour means a larger amount. The outlined cell is the starting point. Rupees for one lot, before charges, priced with Black 76. Read across the unmoved row, then down each column. Source: NSE end of day data, computed by RupeeCase. As of 16 Jun 2026. The term this section turns on: Butterfly From the module glossary; every term is in the Learn glossary too. Source: Module 17.8, Butterflies and broken wing butterflies. Read one more paragraph, 59 words Volatility matters too. In the grid below, read across the row where the index has not moved. The same butterfly is worth more when implied volatility falls and less when it rises, because a butterfly centred on the index is short volatility. Move the index away from the middle, up or down, and the result falls in every column. ### What is a broken wing butterfly? Move the upper wing out. Buy the lower call, sell two at the middle strike, and buy a call further from the middle than the lower one is. Now the sold calls collect more than the bought calls cost, so you start with a small credit. On the low side there is nothing to lose: every leg expires worthless and you keep the credit. All the risk has moved to the far side, where the wing is wider. The loss there is the difference between the two gaps, less the credit. A broken wing does not remove risk. It picks the side where it sits. Call broken wing Max loss = upper gap − lower gap − credit Low side: keep credit A broken wing keeps a small gain below and carries the loss above Buy the 23,800 call, sell two 24,000 calls, buy the 24,300 call, one lot, at expiry on 30 Jun 2026. Source: NSE end of day data, computed by RupeeCase. As of 16 Jun 2026. ### What are ratio spreads, backspreads and the jade lizard? Questions about these come up beside the butterfly, so here are the plain definitions. A ratio spread buys one option and sells more than one further out, which leaves the extra sold options with no cover. A backspread is the mirror: sell one and buy more than one further out. A jade lizard is a sold put plus a sold call spread above it. When the total credit is at least the width of the call spread it has no risk on the upside, and the risk below stays open. A broken wing butterfly is a ratio spread with a far wing bought to close the open side. [Module A09](/learn/path-17/module-17-16-ratio-spreads-and-backspreads) works through them, and their open risk is why they sit at the advanced level. ### What does it cost to run in India? * **The debit** is paid upfront, as SEBI's circular of 1 Oct 2024 requires of net option premium from 1 Feb 2025. A broken wing starts with a small credit, so the broker holds margin for its larger risk instead. * **STT**, at the rates in force from 1 Apr 2026: 0.15% of the premium on the two sold lots, and 0.15% of the intrinsic value on an outer leg that is exercised in the money at expiry. * **Four contracts, three strikes.** The middle strike trades in a double lot, and every leg crosses its own bid and ask. On a small debit those costs are a real share of the trade. Watch in the terminal: what are brokerage, STT, GST and the platform fee? A short tutorial on sample data. ## Worked example: two shapes, two entry dates Both chains expire on Tuesday 30 Jun 2026, settled on the index close for expiries before 7 Dec 2026. The lot is 65 units. The middle strike is the one nearest the future, because these are monthlies. The butterfly puts its outer strikes 200 points either side. The broken wing keeps the lower one and puts the upper wing 300 points out. All prices are settlement prices, not fills. | One lot | Butterfly | Broken wing | | --- | --- | --- | | 16 Jun: strikes | 23,800, 24,000, 24,200 | 23,800, 24,000, 24,300 | | 16 Jun: pay (−) or receive (+) | −Rs 1,800 | Rs 286 | | 16 Jun: most it makes | Rs 11,200 | Rs 13,286 | | 16 Jun: most it loses | Rs 1,800 | Rs 6,214 | | 16 Jun: result at the 30 Jun close | Rs 2,473 | Rs 4,560 | | 10 Jun: strikes | 23,050, 23,250, 23,450 | 23,050, 23,250, 23,550 | | 10 Jun: pay (−) or receive (+) | −Rs 1,359 | Rs 1,241 | | 10 Jun: result at the 30 Jun close | −Rs 1,359 | −Rs 5,259 | Read 2 more paragraphs, 198 words On 30 Jun the index closed at 23,865.75, 134.25 points under the middle strike and inside the breakevens. The butterfly made Rs 2,473, which is 22.1% of its maximum. That close paid only about a fifth of the peak, which is how sharp the tent is. The broken wing, which started with a credit of 4.40 a unit, made Rs 4,560, more than the butterfly. Below the middle strike both shapes pay the same from the lower call, and the broken wing started with a credit instead of a debit. On 10 Jun the picture reverses. Nifty rose 3.3% between the closes of 10 and 16 Jun, from 23,214.95 to 23,989.15, and kept going past both upper strikes. The butterfly lost its debit of Rs 1,359, and no more, because that is its cap. The broken wing lost Rs 5,259, 3.9 times as much. It had moved the risk from the downside to the upside, and the index went up. That is the whole trade off, shown once. It is one fortnight on two dates, and it says nothing about odds. A different pair of dates can come out the other way. ## The common mistake The belief: A butterfly costs almost nothing and pays six times, so it is a cheap way to win. The price is low because the odds are low. The butterfly pays only if the index ends inside a band 345 points wide, and the full Rs 11,200 only on the middle strike itself. Costs weigh on a small debit too. STT on the two sold lots at entry was Rs 44.27, 2.5% of the Rs 1,800 debit, before brokerage and exchange charges. The broken wing looks safer, with no loss on the way down, and the one entered on 10 Jun lost 3.9 times what the plain butterfly lost. SEBI's Aug 2026 study of individual equity derivatives traders found that 87.7% lost money in FY26. A payoff ratio is only half a bet. The other half is the chance of getting it. Two terms to hold on to from 17.8 From the module glossary. Source: Module 17.8, Butterflies and broken wing butterflies. ## Key takeaways * A call butterfly buys one low call, sells two in the middle, buys one high. * Net debit is the most it loses. Gap less debit is the most it makes. * A tall payoff over a narrow band is cheap because the odds are small. * Before expiry the tent is shallow. It sharpens only in the last days. * A broken wing keeps a credit below and carries a bigger loss above. * Ratio spreads and the jade lizard leave one side open: advanced. Where this section sits in module 17.8 Sections 1 to 4 of 4; the highlighted one is next. Source: Module 17.8, Butterflies and broken wing butterflies. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) What does Butterflies and broken wing butterflies cover?A tent that pays near one strike. What it costs, where the money is made, and what a broken wing does to the risk. It works through The idea, plainly, Worked example: two shapes, two entry dates, The common mistake, Key takeaways. It is module 17.8 of Path 17, Strategies and Hedging, about 9 minutes of reading, free. TTry it ## Payoff builder, on the same example. Legs from a dated chain, the expiry and before expiry curves, breakevens and the charges. Dated NSE end of day data, nothing live, no orders. **Payoff builder**, Nifty, 16 Jun 2026, 30 Jun 2026 expiry. [Open the payoff builder](/learn/tools/payoff-builder?chain=NIFTY_2026-06-16_2026-06-30&preset=call-butterfly) AF&O on RupeeCase ## Hedging only, in development F&O at RupeeCase will do one job: protect a portfolio you already own, by a rule published before it runs. No speculation, no naked option selling, no leveraged bets. It is not available yet. [How hedging will work](/hedging)[Sign up for RupeeCase](https://invest.rupeecase.com/signup) [No hedgeFalls with the marketWith a putA floor, for a premiumIllustration with made up numbers, not a product and not a recommendation.](/hedging) QQuick check ## 10 questions, 7 to pass. Each attempt draws 10 of the 15 questions in this module's bank, and a retake draws a fresh set. A pass gives this module's Certificate of Completion. Your result stays on this device and counts towards the Path 17 certificate. 7 of 10 correct passes module 17.8 Every answer is explained when you check; a retake is always free. Source: RupeeCase Learn quiz rules (70% to pass). Passed ### Certificate ID Download PNGPrint or save as PDF[Check the ID](/learn/certificates/verify) Self paced and unproctored. A record of completing free education by RupeeCase; not a NISM certificate and not endorsed by NISM, NSE, BSE or SEBI. It qualifies no one to deal, advise or publish research. CCheck yourself ## Path 17 so far. Your quick check results on this device, stop by stop. Stop 8 of 23 on Path 17 Strategies and Hedging: every live stop, this module ringed. Source: RupeeCase Learn, Path 17. 1. [17.1Reading and building payoff diagramsNot yet](/learn/path-17/module-17-1-payoff-diagrams) 2. [17.2Vertical debit spreads: bull call and bear putNot yet](/learn/path-17/module-17-2-bull-call-and-bear-put-spreads) 3. [17.3Covered call, protective put and cash secured putNot yet](/learn/path-17/module-17-3-covered-call-and-protective-put) 4. [17.4Why and when to hedge: insurance in plain numbersNot yet](/learn/path-17/module-17-4-why-hedge) 5. [17.5Straddles and strangles, long and shortNot yet](/learn/path-17/module-17-5-straddles-and-strangles) 6. [17.6Credit spreads: bull put and bear callNot yet](/learn/path-17/module-17-6-credit-spreads) 7. [17.7Iron condor and iron fly on NiftyNot yet](/learn/path-17/module-17-7-iron-condor-and-iron-fly) 8. [17.8Butterflies and broken wing butterfliesNot yet](/learn/path-17/module-17-8-butterflies#quiz) 9. [17.9Option calendar spreadsNot yet](/learn/path-17/module-17-9-option-calendar-spreads) 10. [17.10Choosing a strategy by view: direction, volatility and timeNot yet](/learn/path-17/module-17-10-strategy-by-view) 11. [17.11Adjustments: what they really do to riskNot yet](/learn/path-17/module-17-11-option-adjustments) 12. [17.12Expiry day: gamma, theta, settlement and the rulesNot yet](/learn/path-17/module-17-12-expiry-day) 13. [17.13Hedging a stock portfolio with Nifty putsNot yet](/learn/path-17/module-17-13-hedging-with-nifty-puts) 14. [17.14Collars and put spreads as cheaper hedgesNot yet](/learn/path-17/module-17-14-collars-and-put-spreads) 15. [17.15Hedging mutual fund portfolios: beta and basisNot yet](/learn/path-17/module-17-15-hedging-mutual-fund-portfolios) 16. [17.16Ratio spreads and backspreadsNot yet](/learn/path-17/module-17-16-ratio-spreads-and-backspreads) 17. [17.17Diagonals and double calendarsNot yet](/learn/path-17/module-17-17-diagonals-and-double-calendars) 18. [17.18P&L attribution by GreeksNot yet](/learn/path-17/module-17-18-pnl-attribution-by-greeks) 19. [17.19Event hedging with event varianceNot yet](/learn/path-17/module-17-19-event-hedging) 20. [17.20Tail hedging and long dated Nifty optionsNot yet](/learn/path-17/module-17-20-tail-hedging) 21. [17.21Hedging an option selling book: wings, vega, gaps and margin stressNot yet](/learn/path-17/module-17-21-hedging-an-option-selling-book) 22. [17.22Kelly and sizing for option strategiesNot yet](/learn/path-17/module-17-22-kelly-sizing) 23. [17.23Risk for option books: scenarios, stress, VaR, ES and margin shocksNot yet](/learn/path-17/module-17-23-option-book-risk) 24. [TPath test, 30 questionsNot yet](/learn/path-17/module-17-23-option-book-risk#pathTestSection) Path 17 in reading time: 215 minutes over 23 modules Minutes of reading per module, this one in amber. Source: RupeeCase Learn, Path 17. Explore next ## Put the module to work. * [Free module 17.7Iron condor and iron fly on Nifty10 min read](/learn/path-17/module-17-7-iron-condor-and-iron-fly) * [Free module 17.9Option calendar spreads9 min read](/learn/path-17/module-17-9-option-calendar-spreads) * [Free module 17.11Adjustments: what they really do to risk9 min read](/learn/path-17/module-17-11-option-adjustments) * [Free module 17.16Ratio spreads and backspreads10 min read](/learn/path-17/module-17-16-ratio-spreads-and-backspreads) * [Free module 17.2Vertical debit spreads: bull call and bear put8 min read](/learn/path-17/module-17-2-bull-call-and-bear-put-spreads) * [Free module 17.1Reading and building payoff diagrams7 min read](/learn/path-17/module-17-1-payoff-diagrams) Community ## Join my WhatsApp group. Scan the code, fillFill one short form, and join my WhatsApp group. Slides, sources, factsheets and the rebalance logs live there, and members join a daily Google Meet with me. New to RupeeCase? [Getting started](/getting-started) [See the terminal](/terminal) [Sign up for RupeeCase](https://invest.rupeecase.com/signup) [Join the WhatsApp group](https://forms.gle/C6HMtM1Z2GfeocQV7) [One form, one group](https://forms.gle/C6HMtM1Z2GfeocQV7)Scan with your phone camera SSources ## Go to the source. 7 sources, NSE the most cited The publisher of each source listed below. Source: Module 17.8 source list. 1. [NSE, equity derivatives contract specifications (lot size, strikes, expiry cycle, cash settlement)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE 2. [NSE Clearing, margins: SPAN, initial margin and extreme loss margin](https://www.nseclearing.in/risk-management/equity-derivatives/margins) NSE 3. [NSE, securities transaction tax on equity derivatives](https://www.nseindia.com/static/products-services/equity-derivatives-securities-transaction-tax) NSE 4. [SEBI circular of 1 October 2024, Measures to strengthen the equity index derivatives framework (upfront option premium)](https://www.sebi.gov.in/legal/circulars/oct-2024/measures-to-strengthen-equity-index-derivatives-framework-for-increased-investor-protection-and-market-stability_87208.html) SEBI 5. [SEBI, Profitability of individual traders in the equity derivatives segment, FY25 to FY26 (Aug 2026)](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) SEBI 6. [NISM, Series VIII Equity Derivatives, test objectives (option strategies)](https://www.nism.ac.in/revamp-nism/test-objectives-revised-nism-series-viii-equity-derivatives-certification-examination/) NISM 7. Hull, J., Options, Futures, and Other Derivatives, Pearson (spreads and combinations) Book GTerms ## 5 terms from this module. ButterflyThree options of one type and expiry at equal strike gaps: buy one at the lowest strike, sell two at the middle, buy one at the highest. Broken wing butterflyA butterfly whose upper wing is farther from the middle strike than the lower wing, so it starts with a small credit and carries its risk on the wide side. Ratio spreadBuy one option and sell more than one further out. The extra sold options have no bought option covering them. BackspreadThe mirror of a ratio spread: sell one option and buy more than one further out. Jade lizardA sold put plus a sold call spread above it. When the total credit is at least the width of the call spread, it has no risk on the upside. The downside risk stays open. [All 230 terms in the glossary](/learn/glossary) [Question people askIron condor, iron fly and butterfly on Nifty: setup and "success rate"?A short answer with a dated chart](/learn/questions/iron-condor-nifty)[Question people askRatio spreads, backspreads, jade lizard and broken wing butterfly: what are they?A short answer with a dated chart](/learn/questions/ratio-spreads-and-backspreads)[Related module17.7 Iron condor and iron fly on Nifty10 min, Intermediate](/learn/path-17/module-17-7-iron-condor-and-iron-fly)[Related module17.9 Option calendar spreads9 min, Intermediate](/learn/path-17/module-17-9-option-calendar-spreads)[Pillar guideDerivatives and Quant115 modules across paths 12 to 19](/learn/derivatives) Education only, not investment advice, a research report or a recommendation to buy, sell or hold any security. RupeeCase (QC Alpha Technologies Pvt Ltd) is not registered with SEBI as an investment adviser or research analyst. Contracts and prices shown are for illustration only, come from NSE end of day files at least 30 days old, and are not recommendatory. Derivatives trading carries a high risk of loss.