Butterfly Strategy
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The butterfly strategy is one of the most robust and versatile option selling techniques available.
In a lazy, quiet market condition there is very little - if anything - to do to manage these positions - other than watch your 0 day risk graph line rise up as your account grows - then close it out to collect your ‘trading paycheck’ at the end of the expiration cycle.
However, this is the case with basically all your standard theta positive monthly income type option strategies - like the iron condor, the calendar and double calendar - the double diagonal, etc.
What sets the butterfly strategy apart from the others is how this spread performs during extreme market conditions.
Ever since the crash in late 2008 delta neutral theta positive monthly income option trading has been a challenging endeavor. Yes, all the basic trades can and have worked - however during many of the months there is more work, adjustments, annoyance, and more stress involved then in past more peaceful times.
Out of all of the strategies - and I’ve traded them all through this period - the butterfly spread trade is the one that is the most robust - most consistent - most reliable - and the one that has given me the least amount of trouble and the most amount of profits.
And even though I do love condors - and I do love double calendars - and double diagonals… well - let’s talk about those later…
Anyway - if a low down dirty thug walked into my trading room one day and forced me at gunpoint to pick just ONE strategy I was allowed to trade for the rest of my life - it would have to be the butterfly spread.
I love you butterfly spread.
Where’s a tissue…
photo credit: mononukleoza
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