Live Broken Wing Butterfly Trade

I put on this trade today around 1:20 pm central time in Sheridan TV. I bought 1   2560 C , S 2  2590 C,   B 1  2615 C,  for an  $11.90 Debit. SPX is trading at $2589 and I am trading the Dec 1 Expiration, 15 Days out.

4 Step Risk Management Plan

Step #1     Set Up:  Sold ATM Call 2 times, Bought the ITM call, 30 points lower than the ATM call, and also Bought 1 call 25 points higher than the short call. My beginning position Greeks are about short 4.34 Deltas for every 1-2-1 Butterfly. Shorter than I normally do , but with the market so high already today , I decided to be a little shorter when starting. This just means I would adjust quicker on the upside than the downside.

Step 2     Profit Target and Max Loss-  8-10 % profit and 10-12% Max Loss on Capital in this example of around $1190, my debit. Would have order in to sell Fly for $12.80 or $12.85 for profit. If the Spread value went under 10.70, would get out

Step 3-  When to Adjust?  Downside: 2570.  Upside:  2600

Step 4-  How to Adjust?  Roll the short call up ( upside adjustment) or short put down (  downside adjustment), by 5-10 points to reduce the position deltas 2/3.

  Dan Sheridan

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