Broken Wing Butterfly For Earnings

As most traders know, volatility gets inflated before earnings, and it gets inherently crushed after the binary event risk (earnings) goes away. When volatility goes down with binary event risk options prices get crushed especially in the front month and weekly options that have the shortest duration. Large account have many more options when it comes to earnings trades because of the amount of undefined risk they can take. However, with people with smaller accounts the options are more limited because they can not take the risk of a naked options with earnings. So the question is how can you get some of the exposure of a strangle/iron condor and a directional credit spread. So if we consider the butterfly it is a low probability of profit non directional spread. However, with a broken wing butterfly we skew it to our direction. In the example above, we sell 2 ATM options, and then we buy an options 1 strike further OTM. Then we add on an ITM option  that is two strikes away from the short ATM options. This skews the spread into our direction with a peak at a non event. What this also does is it embeds a credit spread with the short ATM options and the long OTM option that has a high probability of success. We then are long an ITM option that functions like stock (50% probability of profit), and volatility does not affect these options very much. Then if we apply this trades to earnings the ATM and OTM prices get crushed especially if the stock stays flat or goes our way. Then what happens is because of that premium crush the peak expands, and we have a greater range of higher then we might otherwise get with the spread. This is one of my favorite earnings trade because of the peak expanding. What you do is give yourself a high probability of success while getting a lot more profits that a trader might expect from just a short credit spread.