Broken wing iron condor is a modification of the iron condor strategy where the wings have different widths (the distance between the short put and long put strikes is different from the distance between the short call and long call strike).
This breaks the usual symmetry of iron condor payoff profile.
Broken Wing Iron Condor Payoff
Maximum profit is still reached between the short (inner) strikes.
Profit gradually declines as underlying price grows above the short call strike, or falls below the short put strike (still the same as normal iron condor).
However, with the strike distances different on each side, the gradual deterioration of profit and accumulation of loss as the short option gets further in the money stops at different points on each side.
Unsymmetric Maximum Loss
As a result, while a normal (equally sized wings) iron condor has the same maximum loss on both sides (at or above the long call strike and at or below the long put strike), the losses on the two ends of a broken wing iron condor payoff are different.
Broken wing iron condor reaches maximum loss only on one side – the wider wing side (the one where the distance between the short and long option is greater). On the narrower wing side the loss is smaller (it can even be a small profit, depending on strike selection).
When to Trade Broken Wing Iron Condor
It is clear from this unsymmetric payoff profile that broken wing condor should be traded (in place of normal iron condor) when you have a directional bias.
You believe that while a bigger price move is unlikely (you still want underlying price to stay between the short strikes, where the position makes maximum profit), the risk of it is more significant on one side (the narrower wing side with smaller maximum loss) than the other (the wider wing side, where you are willing to risk a bit more to improve the overall result in the other, more likely scenarios).