New Search

If you are not happy with the results below please do another search

1 search result for:

1

The Time Bomb Butterfly: High Profit Potential, High Risk, but Low Cost

The butterfly is one of the most popular options strategies. There are many different structures for a butterfly, from neutral to more bullish or bearish structures. Also, in the set-up you can have iron butterflies that involve the selling of a put and call vertical and also the all-call or all-put option butterfly. One of the best butterfly strategies is what we call a “time bomb butterfly.” With this strategy you will be buying an all-call or all-put butterfly in an expiry and a strike price of your choosing. Below are two examples. The first is an earnings play, which is one of the best times to use the time bomb butterfly. In this example GOOGL made a large move to the upside. The day before an earnings release we purchase an all-call butterfly centered 50 points above the current market price. With GOOGL trading at $680 our all-call butterfly is centered at $730. The number of contracts and the width of the fly are up to you. The more contracts and the wider your fly the more expensive the fly will be. In this example, we have 10-point wide wings. The trade put on in this manner can be done […]