Breaking up a BWB before expiration

Hilcrest_trader

Hilcrest_trader

I've been trading options for >4 years - now mainly selling PUTs on XSP.

I've started trying PUT Broken Wing Butterflys on SPX and I have a newbie question.

I'm looking at the trade in two parts: (1) When I place the trade I receive a small credit; (2) If the price stays above the Short Put strike the Unrealised Profit on the short PUTs exceeds the small credit I received when I placed the trade.

What happens if I close the short PUT leg of the trade? Will I get the higher credit or simply the balance of the small credit I received when I placed the trade?
 
When you close the short put you spend money.
If you spend more than your initial credit on the BWB (which i would expect to be the case most of the time) you now have a position of two long puts at a debit (initial credit for BWB - amount spent on buying back short puts).

If you happen to pay less than the initial credit you still have the credit left after cost of buying them back and two long puts "for free".
 
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