The butterfly option trading strategy has many different structures and uses. The time bomb butterfly involves buying an out of the money all call or all put butterfly in the direction you think an underlying asset is going to trade. Uncertain Direction Currently, there is a lot of uncertainty among traders as to which direction the market will head. This can be a good set up for the time bomb butterfly in the SPX. One example would be an all put butterfly placed in the Oct 6th expiration 31 days from now, that is centered at 2420. Fly While the width of the fly is up to the individual trader, using a 20 point wide wing could be structured as follows: Buy 1 Oct 6th  2440 put Sell 2 Oct 6th  2420 puts Buy 1 Oct 6th  2400 put This butterfly is currently trading at approximately 1.00 per contract. costing $100 for each 1/2/1 fly structure that is entered plus commission. If this butterfly at expiration is trading near 2420 this trade would net more than a 10 fold profit. It also has profitability from around 2440 to 2400. If you have a bearish sentiment over the next month for […]