Butterfly Live Trade for today and Risk Management Plan
Earlier today I did a Live Butterfly Trade in a webinar for Ally Invest. Below is my 4 Step Risk Management Plan. Step 1: The Set up: I did the Butterfly in SPX at about 11:25 am central today, Oct 9, with SPX around $2548. I bought 1 2520 Call, Sold 2 2550 Calls, and bought 1 2575 Call. I paid $12.15 Debit or $1215 for the entire trade. My beginning position Greeks are: Deltas -2 Theta 13 and Vega -107. Total Capital and Risk for 1 contract is $1220. The expiration is Oct 27 which is 18 days from expiration. Why did I do this? For monthly Income. How does this trade make money? The short options I sold , they decay quicker than the options I bought. ATM options decay faster than ITM or OTM options. Step 2: Profit Target and Max Loss: 8-10% Profit. If I make around 8% on this trade this week, that’s about $100. So if I paid $12.15 debit, my goal is to sell this out for around $13.15 Debit. My Max Loss is 10-12% of the cost of the trade. So if I want to exit the trade at 10% […]