3 Joys of a SPX Weekly Iron Butterfly? 1) By trading every week, you become an better craftsmen 2) The butterfly has a very good potential reward relative to the risk of the trade. 3) SPX is a well diversified Index with great liquidity and you don’t have to deal with the risk of individual stocks. Definition: Iron Butterfly is a trade where one puts on an at-the call credit spread and an at-the-money put credit spread Trade Example in SPX Price is $2073 as I write this. I am looking at the December expiration with 8-9 days till expiration. Sell one 2075 call and buy one 2100 call. Sell one 2075 put and buy one 2050 put. The strike prices for each credit spread are 25 points wide. The total credit of this trade right now is around $20.35 ( $2035). The margin or risk of the trade would be $465 (The width of the credit spreads minus the total credit of the Iron Butterfly). Greeks of the Trade The margin or risk of the trade would be $465. The Greeks on a one contract Iron Butterfly as I described here would look something like this: Delta -4 Gamma […]