Discover how trader Carl Allen uses his 21 DTE broken wing butterfly strategy to consistently profit from SPX options—with an 80% win rate and defined risk.

Carl Allen is an experienced retail trader from Kansas City. He runs the website Datadrivenoptions.com – and has previously explained back ratio call spreads here on Theta Profits.

Watch the interview about Carl’s broken wing butterfly strategy

The video was produced with Streamyard – an easy-to-use and amazing tool for live streaming and recording.

This is a butterfly options trade

We will dig into Carl’s 21 DTE Put Broken Wing Butterfly strategy. But let’s first describe what we mean with a butterfly options trade.

A butterfly options trade is a defined-risk strategy that combines both bullish and bearish positions to profit from a stock or index staying within a specific price range at expiration. It involves three strike prices—buying one contract at the lowest strike, selling two contracts at the middle strike, and buying one contract at the highest strike—creating a “winged” profit zone where maximum gains occur if the underlying asset lands exactly at the middle strike at expiration.

The trade gets its name from the profit/loss diagram, which resembles a butterfly’s wings when visualized. Butterflies can be constructed using all calls (call butterfly), all puts (put butterfly), or a combination (iron butterfly), and they are popular for their limited risk, low capital requirement, and ability to capitalize on stagnant markets or precise price targets.

This is a broken wing butterfly

The broken wing butterfly modifies this structure by making one wing wider than the other, removing risk on one side while allowing for greater profit potential.

21 DTE Put Broken Wing Butterfly

Carl Allen calls his strategy 21 DTE Put Broken Wing Butterfly. He explains his strategy in detail in the video – and has also written extensively about it on his excellent website Datadrivenoptions.com.

In short, these are the mechanics Carl follows in trading the strategy:

• Underlying: SPX. All legs are put options.
• Opens with 21 days to expiration
• When selecting strikes, Carl starts with delta 32 for the highest long put, delta 28 for the two short puts and delta 21 for the lowest long put.
• He will then adjust the strikes to achieve two goals:
  • The widest spread should be twice as wide as the most narrow spread
  • He tries to collect between 12 and 15% of the most narrow spread in premium. If for instance the narrow spread is 25 points wide, he will try to get a premium between 300 and 375 dollars.
• After opening the trade, Carl will immediately set a take profit order of 2% of the narrowest spread. In the example above, this would mean a take profit order at 50 cents.
• He recommends setting a stop loss for twice the premium collected as the simplest way of managing losing trades. But it is also possible to manage losing trades with rolling – and he explains how he does this in the video.

80% win rate

This broken wing butterfly strategy is a high probability trade. Carl reports a win rate of 80%, but says this can drop to about 70% if you use his recommended stop loss.

The strategy performs best in neutral or bullish markets – and will struggle more in bearish markets.

Book recommendation

We asked Carl if he had an options trading book to recommend retail traders who want to learn more.

His recommendation is Lawrence G. McMillan: McMillan on Options – calling it “the Bible of options”.