High Octane Butterfly Trade

I put on the below trade earlier today in a webinar with AllyInvest.

Trade:  High Octane Butterfly trade

Buy 1 SPX Nov 29  2590 C,  S 2  Nov 29  2600  C,  B 1  Nov 29  2610 C,  $3.15 Debit

Risk Management:

I would sell out the Butterfly for $3.50 or higher, about 10% yield on every 1-2-1 Butterfly. If the Debit goes under $2.80, would get out. Would get out of trade by 10 am central tomorrow at the latest.

Dan Sheridan 

dan@sheridanmentoring.com

options trading courses

Blog Update from Today’s Live Butterfly from earlier today

Took off the trade I bought about 1  ½ hours ago for $11.90 Debit for a credit of $12.40. Why was I able to do this? SPX dropped from our short strike of  $2590 to $2585, and we were short about 4.3 Deltas for every 1-2-1 Butterfly at trade initiation.

 Dan Sheridan

dan@sheridanmentoring.com

options trading courses

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 

dan@sheridanmentoring.com

options trading courses