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Yep, some of this can be quite difficult to take in, you really have to pay attention to detail, be good in basic math, and have good multi-tasking skills. And for anyone who is just getting started on their own in stock trading shouldn’t be using this strategy. Just learn how to buy low and sell high on swing trading for a bit. Do your research, have a good spread of stocks, don’t just put your money in just 1 particular stock, have 5 to 8 stocks, put a few of them in low risk that you wouldn’t mind holding on to for long time, and practice on 1 or 2 stocks to research in and play with. Buy in low sell high, get out. Buy in low sell high, rinse repeat. You can make money, it will take a little time to build up a good amount of money, but over time, of sliding funds into your account, and mixture of learning on how to buy low sell high with 2 stocks you can graduate to doing this with 3 different stocks, 4 different stocks, and so on. But, this is what I’m doing for now, this strategy of trading options can be done on the think or swim platform for practice. The main thing I’m getting at is be cautious and thing logical.
Being new to trading options I would love a step by step tutorial on how to place a broken wing butterfly and other option strategies. It’s difficult to tell where the calls/puts are in your video but I love the instruction. Seth is an excellent trainer and really breaks things down into an easy-to-understand explanation.
This was great, thanks, I've been looking for "options trading program" for a while now, and I think this has helped. Have you ever come across - Winoorfa Option Olegroson - (do a search on google ) ? Ive heard some incredible things about it and my work buddy got cool results with it.
Start small and slow. Butterfly's are more complex. Start with Vertical Spreads, Iron Condors, and an occasional Naked Put/Call on VERY low priced underlying ($20 or less). Start there and then move onto Strangles, Straddles, Iron Flys, Diagonals. Finally, Butterflys and other things. Also there are futures as well.
Same. Not ready to try this yet and I have an honor's degree in Economics and Accounting with a minor in applied math. Yet, is the key term here. We will get there.
I always cut the trade if it loses as much as I'm looking to gain. Keeping a 1:1 risk reward ratio on known max gain trades is paramount for me. I like your teaching and presentation style.
It would have to be 1:1 or at least something approximating that ratio, because if you took a loss of $2000, as was stated during the broken butterfly strategy, for approximately 20% of the time, within a year, you effectively make nothing. Am I missing something or does this make since? I'm new to this btw, just trying to understand.
You will still be in profit. Out of 10 trades you lose 2 x $2000 (20 percent) = - $4000.00. You win 8 x $1000 (80 percent) = + $8000.00. The difference is $4000.00.
Thank you for being honest and real. I’m getting back to trading after a long time away from it. I had a professional career trading equities and options. I plan to attend many of your classes to develop my options trading skills. I’m learning from your information already.
Honest and glaringly straight to the point. There is no magic ATM machine out there. And, you will face losses. You will need $62K in capital/margin to make $52K or 81% returns, with losses, based on where the option is headed. This BROKEN WING BUTTERFLY strategy on the SPX index is definitely for intermediate to expert traders. Thank you Seth Freudberg.
@@tylerrb1937 Honestly age has nothing to do with it. If you can understand the nuance of the trades and do the math, you should be fine. One thing you must do though is keep wishes and ego out of your decision making process. This is not place for wishful thinking... you must be disciplined, follow the strategy to the letter, understand there will be losing weeks and budget for the weeks you will lose money. Because those weeks will come.
I have just started a Options class I paid $900 for. I thankyou for explaining with as little as $65,000 i can make $48k +/- a year. At present I make 16 % on $200,000 or $32,000. So your numbers are interesting to me.
I'm struggling in this market. Stocks that I have held for months and made profits from are not behaving the way I'm used to so I’m quite indecisive on how to tackle this market, any advice would be grateful.
Hello Seth Freudberg! A retail investor with a small account (under 5K) would rather do a different technique. A "naked" PUT option for example for this week of March 1 thru 5 2021 on WKHS and RKT. An investment of 14K will bring an awesome return. Thank you for not telling me that is a very dangerous game (naked options). I've learned it hard way.
You guys are such an inspiration and an authority on options trading. Glad to see your channel exploding! Here are some questions for upcoming videos: 1) When to do Deep OTM options 2) When to do Deep ITM options? 3) This strategy is for a bull market, can you also give an example of a bear market? Do you use the call side or do you do debit spreads? Lots of questions, I know but it would be nice to know as time decay is crucial in options trading.
The workshop goes over Credit Spreads and Iron Condors.Its pretty clear and easy to understand. In short if you have a small account, don't waste the 2 hrs. 30 mins is spent hyping up their own legitimacy at the beginning, 30 min at the end offering their 6 -8k video course.
At 13:20 their is an invite to a webinar to learn 3 options strategies. In the said "webinar" this is how it goes: +- the first 30 minutes of the "webinar" is about how great SMB is. in +- the next 60 minutes the said three strategies presented. The webinar explains these strategies conceptually, no different than most basic options literature would explain it. (e.g. iron condors and put credit spreads.) +- the last 30min is used to sell you an options strategy course for $1997.00. The webinar only addresses three simple options strategies in a very basic way, adding no additional value over any decent options strategy handbook. The webinar invite (the video above) made no mention of the sales pitch at the end of the webinar. It does seem that the "webinar" served as bait; after wrestling through 90 minutes of mundane it seems reasonable to want to listen through to the end / complete the webinar, only to be subjected to a trading education sales pitch all to familiar in the retail trading space. Disappointed, disgusted.
@SMB Capital - Seth - there's a better way to close a winning BWB trade, in my opinion. Let's say you do the strategy you explained in the video as a 1-lot, so your profit is $100/lot, and your losers are $200/lot. Instead of simply closing the winning trade when it reaches $100 of profit, do this: buy the debit spread which would convert the BWB into a regular butterfly _when_ that debit spread reaches a cost of 10 cents. So you're spending $10 bucks of your $100 profit to buy this spread, but you save 50% in commissions (since you're just buying/selling 2 contracts instead of 4 with the whole butterfly), _and_ you're left with a regular butterfly that now has a "max-loss" of a $90/lot _profit_ and a "lotto-ticket" max-profit the same as the original BWB minus 10 bucks. So by giving up 10 bucks/lot of the original BWB's normal profit, you get to keep your lotto ticket in case the market sells off by a lot and expires at the BWB's top profit point _and_ you're still guaranteed to make $90/lot in _any_ other scenario, no matter what! Here's a REAL-WORLD EXAMPLE of exactly what I'm describing above in a live-trade that I have on right now: On 12/26/2019, I bought the SPX 3115/3110/3075 PUT butterfly expiring on 1/10/2020 for a -1.00 debit (so really a $1 credit). Afterwards, I put an order out to buy the 3105/3075 PUT debit spread for a 0.10 debit (which is OCO'd to my stop-loss order). The market for this debit spread is currently 0.15, so I hope to get filled sometime tomorrow, as the market is strong, and there's only four days left to go on the butterfly - the theta decay alone should bring the debit spread to 0.10. What I'll be left with is a normal 3115/3110/3105 butterfly with a built-in _guaranteed_ $90/lot profit and a max-profit of $590/lot. I just love looking at the risk-graph of these "locked-profit" spreads, as there are no negative values! And there's still 4 days left to go until expiration! You can do a similar thing with a lot of complex-option trades, but the BWB is probably the best to do them on since it doesn't take away much of your original profit-target. Of course, now that I'm writing what I hope to happen, the option gods are going to strike me down, and the market will crash tomorrow, lol!
@Galileo7of9 - You basically have the idea right. But remember, you buy the $10 debit spread _after_ the butterfly is nearly worthless, so you already have almost a $100 to $110 floating profit on the broken wing butterfly. By spending $10 bucks on the "conversion" debit spread, it's like you're taking $10 out of your floating profit, and spending it in advance. Once the trade executes, you will see on your risk profile graph that you have no negative "max loss" anymore - in TOS, the light cyan line is all above zero at _any_ price, 0 to infinity. Sure, you're spending $10 bucks on something that has _almost_ no chance of happening - 2% in your scenario; but 2% isn't nothing... you could close your entire broken wing butterfly and keep that extra $10 bucks and pay double in commissions, but then you'd have a 0% chance of getting an extra $2890 bucks. You're right, on paper, it seems like a lottery ticket doing it my way, but it _has_ happened to me one time where I spent $20 bucks to close this _exact_ same type of BWB (broken wing butterfly) trade on NFLX (I had two lots), and it expired within 1 cent of my short PUT body strike! I spent $20 bucks, and made an extra $6000 dollars! So there you have it! I would've so kicked myself if I had just closed the whole BWB trade at the ~$240 floating profit I had at the time (on the Thursday before expiration). So, yeah, 2%... :D If I had always closed the entire BWB trade in one swoop (no extra debit spread), I would have to do this same trade 300 times before the extra $20 dollars in savings added up to the $6,000 I made on that one day.
@Galileo7of9 ok, so the problem was you did the -3170/+3165 spread, but it should be the -3155/+3165 PUT debit spread for 0.10 debit. This shows a max loss of +$100. I was the in the SPX 24 JAN +3175/-3170/-3170/+3140 bwb until today, which I originally got for a 1.05 credit (shows as -1.05 debit in TOS) on 1/13. Today, my GTC order for the -3175/+3200 debit spread got executed for 0.10. Now that makes my position the +3140/-3170/-3170/+3200 PUT fly. TOS now shows this position with the cyan line at +$1016 at the base (max loss) and somewhere around +$6500 max profit (my position size was 2 lots). It's showing about $850 more on the "max loss" than it should because it's no longer considering the amount I paid for the 3175 PUT originally (which was $4.28 x 2 lots = about $850). Now is it more clear?
@Galileo7of9 - another way to look at this is: I have the 3200/3170/3140 PUT butterfly as my final position today. What were my net debit/credits used to get here? I'll read you my trade history: on 1/13, got in a 1.05 credit, and on 1/21 (today) got debited 0.10. So what's my net? A credit of 0.95. Now go into TOS and enter an order for buying the 3200/3170/3140 fly for a 0.95 credit. Hit analyze. Now do you see no negative values? Max loss of +$190, right? Of course, nobody would sell you this fly for a 0.95 credit because it guarantees them a loss (and guarantees you a profit), right? Also, no brainer, they wouldn't. So the only way to get a fly like this for a 0.95 credit, is to break up the trade, take that "time risk", and then later do the conversion trade. That "time risk" you took translates to your now guaranteed small profit, or huge profit (if the market crashes before Friday). And that "time risk" is potentially huge, remember - max loss on my original BWB was somewhere around $2300/lot and about $900/lot on your BWB (your lowest strike is much further inward, so you have less risk).
Good presentation but it could be improved greatly by illustrating the broken wing option trade on an actual chart and explain briefly what happens as the price of the underlying instrument goes up or down.
Great video. Thank you! Question 1: why the 10 Delta strike...why not, say 15 Delta for the short strike? Qustion 2: Is there a weekly butterfly strategy with a very minimal capital requirement and high profil/loss ratio?
Would it be a good idea to do this on the call side also like an iron condor so you could make more money on the same capital or am I missing somthing?
Hey there, just getting started, dont understand anything you are talking about. Kinda like my chemistry class and learning the periodic table...doesn't make sense at first until one day...it finally sinks! I'm just not there yet.
Probably the same odds of success as repeatedly betting black on a roulette table with a exit point. (E.g. if I lose x dollars or win y dollars I’m out)
Is there a benefit to using a broken wing butterfly over a regular credit put spread? Would using put spreads with the same 10 delta, 1000$ target profit, 2000$ stop loss give the same results?
In looking to put on this trade I'm seeing the price difference on the put debit side of the trade is more than the difference on the put credit side. I'm not sure if that's just the market right now. Really want to try this but right now looks like it just locks in a loss. Or maybe I misunderstand it... I'll watch it again
Is it possible to put up a video on how to determine / calculate return on investment selling naked options. (call / put) If possible could you use the SPX ? Thankyou. Looking forward to a response.
This trade consists of two vertical spreads. A) 10 put debit spreads: Buy 10 $SPX 3045 puts = $-7,700 Sell 10 $SPX 3040 puts = $+7,200 ======= $ -500 Max Loss = $500 @ $SPX >= 3045 Max Gain = $4,500 @ $SPX = 3040 Max Loss = $20,000 - $1,800 = $18,200 @ $SPX
Even the market go side way, you would have profited upon premium decay toward the expiry. The hardest is to pick a correct short point. When too close, the risk would be too high, when too far way, the profit would be too small.
Is it relatively manageable for one person to use $100k 0r $ 200k to trade to generate say $2000 or $3000 per week? In other words how easily does this method scale?
This was great, thanks, I've been looking for "examples of options strategies" for a while now, and I think this has helped. You ever tried - Winoorfa Option Olegroson - (search on google ) ? Ive heard some pretty good things about it and my co-worker got great results with it.
Of course you can make a weekly income lmao look at tsla and appl not to mention the downfall of roku and fedex with the upside/downside of ba hell yea brother im 19 and trading is my income... im also a full time college student, i wish i was into forex also but thats a little more difficult in my opinion
Enjoy your videos. Very simple and informative for amateurs. Thanks for your efforts.. I have just started trading/ investing .. got some good profit. Looking for options trading now. Planning to take your workshop some time soon ☺️.
I'm interested as to why you wouldn't let the short puts run to expiration worthless letting you keep the entirity of the credit received from selling it and simply sell the long puts closer to experation to reclaim some of debit from buying them for a greater profit
Is thisstrategy still applicable in Feb/March 2022. It seems premiums 2 week out in the SPY has drastically reduced. Barely enough difference between (20 x Put at 0.1 delta) - (10 xPut $5 above) =$1000. And the bottom strike is so far out of the money or in this case doesn't exist that the margin required is quite large. Would one reduce the length of the top wing? Is it unadvisable to go out 4 weeks instead of 2?
What will be the expectation of the market trend for this strategy? should it be a bullish or bearish or side way? Can it be used at the call side and how? Thanks for your time.
Hello Seth This case study is based on the market rally and the index moved away from the strike price. But what if there is a market downturn, then how do you compute the loss? Thks
If you're going out 2 weeks on your options then you could go out one week on one of your protective puts. I take it you weren't doing that here. Then what results could you have.
Couldn't you double this up by doing sort of a iron condor version of this by doing a 10/-20/10 call spread ABOVE the stock price as well? You would just have the same rules, 10 delta, 1 strike below, then go up until you find an option price that gets you just over your $1000 credit objective, but do this for a call. Seems like you could more than double your potential average earnings by having maximum gains of $2,600, and maximum losses of only $700. Whenever you would lose the entire $2000, you would automatically get the $1300 on the otherside, for a maximum loss of $700. The margin requirement still would
Ok,, so same strategy of selling 10 delta puts For all 52 trades? Or was it mixed depending on market direction bias and why $2000 as the risk per trade and not less? $2000 would represent nearly 10% of the total risk capital required by broker per trade. Seems kinda steep. I risk no more than 3% on short option swing trades and only 1% on long trades.
The webinar provides good instruction regarding selling puts, iron condors and bull put credit spreads, but nothing that is not taught in other TH-cam videos. However, over half of the over two hour course is spent trying to hard sell their 15 session online video course and lifetime coaching costing $1997.
Hopefully people aren’t paying that much money. This is all very basic option strategies. Get a Natenberg from the library and teach yourself. I am not a fan of 1:1 risk reward ratios like in this example. I would look for strategies with a 3.5:1 risk reward or better. But these days options are priced correctly so you get what you pay for.
Great video, I’m still new to options. My question to you is when looking at volume and open interest, are high open interest options the good choices to pick. Thanks 🙏
Overall open interest in the stocks options are more important. You can trade a strike with low open interest if other strikes have decent open interest. The higher liquidity of a stocks options will be reflected in a tighter bid/ask.
Super confusing... Can you show the risk profile of this trade? Or an order / execution as an example? It's hard for me to visualize what's going on with the broken wing strategy and what the risks are. Thanks
I don't really understand why this strategy would be better with a broken wing butterfly than with a short put spread. You wouldn't need to buy the higher put and it would be enough to sell half the amount (10 instead of 20). Your potential profit to start with could be higher, in your example, instead of 1300$ it'd be 1800$ (as you'd save the 7700$ you pay for the buy) and even though your risk is higher, you'd get out anyway when things go south, you'd just need to get out a little bit higher. But instead of closing the trade at 1150$ profit (or 1000), you can close it when you are at 1400$-1500$ profit. Plus, you'd need to pay less commission as you only make 2 transactions instead of 3.
@Galileo7of9 I'd make a couple of points. One: if someone's going to trade options, they really need to be informed and imbedded in market news and direction daily. That said, a firm assessment of COVID's market impact should've been an immediate red flag on 21Feb2020 and maybe an indicator to exit leveraged positions, especially with increasing volume heading into a weekend. Traders really need to understand when a shift in market sentiment has occurred. This is something that I don't know can be taught, but experience will get you most of the way there. Two: I don't like holding positions over the weekend for this very reason. It concerns me a bit that the video above suggests Friday entries are made - too many DJfnT wartwitter weekends in the past year to make me ever feel comfortable with long-biased positions. That said, I wish more strike price data was given in the video, so I could extrapolate the loss based on your premise. I guess I could look up the data or create a model but just don't want to. Three: paper trade it starting in late December 2018. The losses here will be minimal in context. Anyone can choose the best or worst case data set, myself included. Not everyone can be consistent. If one can't accept a loss, one shouldn't trade this way. Four: seems like the trade in the video executes over 10 days. That's a little more than a week, so not really within the original premise set forth in the video; however, will freely admit that I don't know if we're talking an average holding time of a week over the period tested.
What! No how to figure out and execute the strategy and close upon a draw down situation? Is it just when our losses approach $2,000 as best we can tell? Help!
@Galileo7of9 So are you saying you just closely monitor it and if losses approach $2,000 to close your relevant position? You talked about trying to have no more than a $2,000 loss?
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Max loss is capped at $15,020, which would occur if $SPX closes below the lowest strike of 3020. Loss is the same for any value below 3020, I will use 3000 to illustrate. Net Loss made up of: +45,000 on Long 3045 Put : (3,045 x 1,000) - (3,000 x 1,000) = 45,000 +20,000 on Long 3020 Put : (3,020 x 1,000) - (3,000 x 1,000) = 20,000 +1,300 on Net Premium from trade entry - 80,000 on Short 3040 Put : (3,000 x 2,000) - (3,040 x 2,000) = -80,000 -20 for options commissions : .50 x 40 (entry only, options assigned at close assuming $0 assignment fee) Don't forget to include these commission! High volume transaction fees sneak up on you. Running this weekly would incur over $1,000 in commissions on options, assuming a reasonable $.50 per contract commission. It can be worse with assignment fees depending on your trading platform. The concept of this strategy includes NOT letting this max loss occur by closing the trade when you hit a $2,000 loss. Theoretically that makes sense, in practice you need to monitor the real-time value of the trade and there are certainly cases, such as a large drop on opening that breaches your loss limit where you can't exit quickly enough to stay below your 2,000. You should be able to avoid the max loss scenario under almost any circumstance. ALMOST any, but not guaranteed.
Don't you already have to own these contracts in order to sell them??? Or have enough money to own the shares or contracts first? And then enough money to buy and sell the put options? Wouldn't you need more then $2500 to play in the options market game? Since 1 contract is equal to 100 stocks of 1 company and equal to 1 contract share.
Collect 1k on 25k margin in 14 days, stagger another position 1wk into the first trade, ladder & keep rolling, avg 1% wk return on pie (ROE)/10% return on slice (ROI).. if don't mind cap inefficiency and volatile PnL increment volatility/frequency of change/path dependency distribution to destination point of max credit collected
Thank you for the information, I'm still a bit fuzzy though. Can someone explain to me what the main differences is between this strategy and a put credit spread?
The main difference is in the max profit . Credit spread max profit n loss is set at the beginning. BWB achieves max profit when the price actually drops to the sold strikes, which means the profit is not defined until the last moment.
This trade consists of 10 put debit spreads and 10 put credit spreads: A) 10 put debit spreads: Buy 10 $SPX 3045 puts = $-7,700 Sell 10 $SPX 3040 puts = $+7,200 ======= $ -500 Max Loss = $500 @ $SPX >= 3045 Max Gain = $4,500 @ $SPX = 3040 Max Loss = $20,000 - $1,800 = $18,200 @ $SPX
I'm not understanding the appeal of this broken wing butterfly over just a straight bull put credit spread. Use the same short, and buy the protection 20 pts below, and use the same $1000/$2000 gain/loss. The trading curve is identical with half the commission, unless you end up in the small 5 pt "tent" on the butterfly at expiration. But you would have punched out before that point with your max loss anyway.
I only need a $500 week supplement ...however only been learning this stuff since a few months ago ...I needed a challenge and I can't climb Mt. Everest ..it's too far away!
In my experience, back testing never gives the accurate win ratio and risk reward as when you try the strategy live. There are also many extra variables like fills, bid ask spread and psychology (e.g patient for targets) that makes this difference. Have any of your prop traders been trading this for a year, or is just the results of a back testing algorithm?
@@haritzaldazaba is not. a lot of times traders can't have 1) patience to wait for the right entry 2) patience for the target to hit (a.k.a) they will take profit early 3) they won't take their loss when they should. all this play as well on any trade you do live. that, your backtest can't include
@@sistematico17 we are not talking about dicretionary trading. Those situations happen in discretionary trading, not in the type of trading the videos is about.
Good explanation Thank you Which brokers allow those transactions on the indexes? ($100/point)? My broker want me to have the buying power before I place the trade.
Great video! I'm kinda of newbie in options trading and and based on the tradings I've done so far, I'm thinking of switching to a regular(plain) options or just stick with "Asset or Nothing" put options..Any advice or suggestions will be very much appreciated, thanks!
Well I think since you're a newbie and still finding your way around the whole options trade, you should stick with the asset or nothing trade because it's straight forward and less demanding compared to the regular trade which I believe is more profitable but requires lot of experience and complications for you to find your way around.
I'll have to agree with the sales rep. You should stick with the asset or nothing trade for now because it is far more easier to work with although the regular offers way more profits depending on the underlying assets though.
Me too! you'll need a much more experienced trader to help you out if you're trying out the plain trade, a trader who's been on this for long and knows how to work his/her way around it.. that way, you not only cut your loses and make maximize your profits, you also gain more experience and grounds while at it.
I couldn't agree more with Allen! There are a lot of things you've got to understand when trading options especially as a newbie, and it takes times to master and understand the various patterns so you can't just start trading on your own or you're most likely going to run at a loss, be discouraged and end up quitting which personally I believe is the wrong option.
Really glad to have stumbled on this, very insightful! Please can anyone recommend a good, well proven and experienced trader I can work with? Thanks guys.
Hi Seth, does the 2000 loss include the 1000 credit? Ie. When loss hits 3000? From the way the you said it, it seems like close the position when there is a 2000 loss but if you take in the 1000 credit, it means its only 1000 loss and not 2000. Please advise
Studies have shown that market go up more often than not. This is the edge in this PUT BWB. Also I believe 10 delta on the call side is nearer to the price. Need to check on that though.
5:20 actually starts
Doing gods work
You saved people thousands of hours
I should’ve come straight to comments, I saw this until when I was 4:49
my man
thank you
no sugar coating - no click baits. I love content like this! Keeping it realistic is a big positive as well.
The constant reminder that you need to be prepared to take losses and plan accordingly is why I keep coming back to this channel.
thx Alex! glad to have you back
If you need to be reminded that you need to be prepared to take losses, simply do a few of these trades.
lmao@@herrickinman9303
Just getting into all this trading, investing. This video has been by far the most up front and honest training/teaching I've watched.
Then wait till you try out Mr Fabian, his trading strategies and investments techniques are top notch and you're rest assured of making profitable returns with him. He's a verified and proven trader. By far the very best I've ever worked with. You can réåch him on * fabianconner770 ⓐ gmaiI, com *
Absolutely agree! Staying consistent and managing risk properly has been great for options income strategies!
Yep, some of this can be quite difficult to take in, you really have to pay attention to detail, be good in basic math, and have good multi-tasking skills. And for anyone who is just getting started on their own in stock trading shouldn’t be using this strategy. Just learn how to buy low and sell high on swing trading for a bit. Do your research, have a good spread of stocks, don’t just put your money in just 1 particular stock, have 5 to 8 stocks, put a few of them in low risk that you wouldn’t mind holding on to for long time, and practice on 1 or 2 stocks to research in and play with. Buy in low sell high, get out. Buy in low sell high, rinse repeat. You can make money, it will take a little time to build up a good amount of money, but over time, of sliding funds into your account, and mixture of learning on how to buy low sell high with 2 stocks you can graduate to doing this with 3 different stocks, 4 different stocks, and so on. But, this is what I’m doing for now, this strategy of trading options can be done on the think or swim platform for practice. The main thing I’m getting at is be cautious and thing logical.
Thank you for the tips 👍🏼👍🏼👍🏼
Being new to trading options I would love a step by step tutorial on how to place a broken wing butterfly and other option strategies. It’s difficult to tell where the calls/puts are in your video but I love the instruction. Seth is an excellent trainer and really breaks things down into an easy-to-understand explanation.
If anyone is new to options, then they should NOT be trading butterflies. This is an advanced strategy and not suitable for newbies.
@@desisher5292facts 💯 %
At least this guy is honest and realistic about drawdowns.
even happens to the best traders at SMB
Enjoyed the lesson. I’m just learning options now and not ready for this, but maybe in the future.
This was great, thanks, I've been looking for "options trading program" for a while now, and I think this has helped. Have you ever come across - Winoorfa Option Olegroson - (do a search on google ) ? Ive heard some incredible things about it and my work buddy got cool results with it.
Start small and slow.
Butterfly's are more complex. Start with Vertical Spreads, Iron Condors, and an occasional Naked Put/Call on VERY low priced underlying ($20 or less).
Start there and then move onto Strangles, Straddles, Iron Flys, Diagonals.
Finally, Butterflys and other things. Also there are futures as well.
Same. Not ready to try this yet and I have an honor's degree in Economics and Accounting with a minor in applied math. Yet, is the key term here. We will get there.
Put this trade on 12/4. Up $800 in 2 days. Thanks Seth for all you guys do for retail traders!
Tony Hamby how much did u invest?
@Galileo7of9 Why do you say this is "meaningless"??
Update?
I appreciate the honesty about having the possibility of spiraling losses.
I always cut the trade if it loses as much as I'm looking to gain. Keeping a 1:1 risk reward ratio on known max gain trades is paramount for me. I like your teaching and presentation style.
It would have to be 1:1 or at least something approximating that ratio, because if you took a loss of $2000, as was stated during the broken butterfly strategy, for approximately 20% of the time, within a year, you effectively make nothing. Am I missing something or does this make since? I'm new to this btw, just trying to understand.
@@caw5v yeah ideally you'd want to get out long before you reach a max loss scenario. As long as you lose less than you make you'll be good
You will still be in profit. Out of 10 trades you lose 2 x $2000 (20 percent) = - $4000.00. You win 8 x $1000 (80 percent) = + $8000.00. The difference is $4000.00.
@@georgio318 The problem is when the market gaps down below bottom strike and you lose $15,000. It's hard to set a limit loss in the market.
@@lrbjr123 can't happen on a spread.
Also closing your winners at a set % keeps em from coming back on you and being losers.
Thank you for being honest and real. I’m getting back to trading after a long time away from it. I had a professional career trading equities and options. I plan to attend many of your classes to develop my options trading skills. I’m learning from your information already.
Honest and glaringly straight to the point. There is no magic ATM machine out there. And, you will face losses. You will need $62K in capital/margin to make $52K or 81% returns, with losses, based on where the option is headed. This BROKEN WING BUTTERFLY strategy on the SPX index is definitely for intermediate to expert traders. Thank you Seth Freudberg.
Why not do the same strategy at SPY? It would require 10X less capital.
what about a 17 year old trying to start
@@tylerrb1937 Honestly age has nothing to do with it. If you can understand the nuance of the trades and do the math, you should be fine. One thing you must do though is keep wishes and ego out of your decision making process. This is not place for wishful thinking... you must be disciplined, follow the strategy to the letter, understand there will be losing weeks and budget for the weeks you will lose money. Because those weeks will come.
I have just started a Options class I paid $900 for. I thankyou for explaining with as little as $65,000 i can make $48k +/- a year. At present I make 16 % on $200,000 or $32,000. So your numbers are interesting to me.
This guy's presentations seem remarkably free of b.s.
The first 5 minutes are essentially and ad with good graphics?
I'm struggling in this market. Stocks that I have held for months and made profits from are not behaving the way I'm used to so I’m quite indecisive on how to tackle this market, any advice would be grateful.
@PhyllisPierce That sounds great and what signal do you invest with?
@PhyllisPierce That's awesome and please how do I connect with this broker lady?
@PhyllisPierce I'm currently on her webpage now, her reviews are very impressive and I left a message for her. thanks, a lot.
Hello Seth Freudberg!
A retail investor with a small account (under 5K) would rather do a different technique. A "naked" PUT option for example for this week of March 1 thru 5 2021 on WKHS and RKT.
An investment of 14K will bring an awesome return.
Thank you for not telling me that is a very dangerous game (naked options). I've learned it hard way.
Why example of Put Options only? Does it work for Call options? How to choose Call or Put?
You guys are such an inspiration and an authority on options trading. Glad to see your channel exploding! Here are some questions for upcoming videos: 1) When to do Deep OTM options 2) When to do Deep ITM options? 3) This strategy is for a bull market, can you also give an example of a bear market? Do you use the call side or do you do debit spreads? Lots of questions, I know but it would be nice to know as time decay is crucial in options trading.
The workshop goes over Credit Spreads and Iron Condors.Its pretty clear and easy to understand. In short if you have a small account, don't waste the 2 hrs. 30 mins is spent hyping up their own legitimacy at the beginning, 30 min at the end offering their 6 -8k video course.
Thank you
You are really professional Mr. Freudberg!
thx Haim!
Thank you for this information. I like someone to shoot straight and no bull. I subscribed.
Thx Micheal! Glad to have you as a subscriber
No bull... lol
Who cares if it's $150 / month for a $5,000 account. Fuxk that
I just do call options on good stock. Every now and then put spreads.Options can get addicting be careful.
Some examples of current put spreads?
Pavel Curda I’m putting in a put on WingStop tomorrow.
Any plan to make a million in 5 years
True very addicting
@@willmurrin9344 details?
At 13:20 their is an invite to a webinar to learn 3 options strategies.
In the said "webinar" this is how it goes:
+- the first 30 minutes of the "webinar" is about how great SMB is.
in +- the next 60 minutes the said three strategies presented. The webinar explains these strategies conceptually, no different than most basic options literature would explain it. (e.g. iron condors and put credit spreads.)
+- the last 30min is used to sell you an options strategy course for $1997.00.
The webinar only addresses three simple options strategies in a very basic way, adding no additional value over any decent options strategy handbook.
The webinar invite (the video above) made no mention of the sales pitch at the end of the webinar.
It does seem that the "webinar" served as bait; after wrestling through 90 minutes of mundane it seems reasonable to want to listen through to the end / complete the webinar, only to be subjected to a trading education sales pitch all to familiar in the retail trading space.
Disappointed, disgusted.
This is how they make the money. Some are going to pay.
Great content. If you could zoom in you screen when you display tables that would help people like myself with poor eyesight.
Thanks
thanks for suggestion.
Try zoom under accessibility if using ios, or mag tool if windows 10
Hit the Windows key Then the plus key, but, definition not great, for him to give a closer zoom would improve.
@SMB Capital - Seth - there's a better way to close a winning BWB trade, in my opinion. Let's say you do the strategy you explained in the video as a 1-lot, so your profit is $100/lot, and your losers are $200/lot. Instead of simply closing the winning trade when it reaches $100 of profit, do this: buy the debit spread which would convert the BWB into a regular butterfly _when_ that debit spread reaches a cost of 10 cents. So you're spending $10 bucks of your $100 profit to buy this spread, but you save 50% in commissions (since you're just buying/selling 2 contracts instead of 4 with the whole butterfly), _and_ you're left with a regular butterfly that now has a "max-loss" of a $90/lot _profit_ and a "lotto-ticket" max-profit the same as the original BWB minus 10 bucks. So by giving up 10 bucks/lot of the original BWB's normal profit, you get to keep your lotto ticket in case the market sells off by a lot and expires at the BWB's top profit point _and_ you're still guaranteed to make $90/lot in _any_ other scenario, no matter what!
Here's a REAL-WORLD EXAMPLE of exactly what I'm describing above in a live-trade that I have on right now:
On 12/26/2019, I bought the SPX 3115/3110/3075 PUT butterfly expiring on 1/10/2020 for a -1.00 debit (so really a $1 credit). Afterwards, I put an order out to buy the 3105/3075 PUT debit spread for a 0.10 debit (which is OCO'd to my stop-loss order). The market for this debit spread is currently 0.15, so I hope to get filled sometime tomorrow, as the market is strong, and there's only four days left to go on the butterfly - the theta decay alone should bring the debit spread to 0.10. What I'll be left with is a normal 3115/3110/3105 butterfly with a built-in _guaranteed_ $90/lot profit and a max-profit of $590/lot. I just love looking at the risk-graph of these "locked-profit" spreads, as there are no negative values! And there's still 4 days left to go until expiration! You can do a similar thing with a lot of complex-option trades, but the BWB is probably the best to do them on since it doesn't take away much of your original profit-target.
Of course, now that I'm writing what I hope to happen, the option gods are going to strike me down, and the market will crash tomorrow, lol!
@Galileo7of9 - You basically have the idea right. But remember, you buy the $10 debit spread _after_ the butterfly is nearly worthless, so you already have almost a $100 to $110 floating profit on the broken wing butterfly. By spending $10 bucks on the "conversion" debit spread, it's like you're taking $10 out of your floating profit, and spending it in advance. Once the trade executes, you will see on your risk profile graph that you have no negative "max loss" anymore - in TOS, the light cyan line is all above zero at _any_ price, 0 to infinity. Sure, you're spending $10 bucks on something that has _almost_ no chance of happening - 2% in your scenario; but 2% isn't nothing... you could close your entire broken wing butterfly and keep that extra $10 bucks and pay double in commissions, but then you'd have a 0% chance of getting an extra $2890 bucks. You're right, on paper, it seems like a lottery ticket doing it my way, but it _has_ happened to me one time where I spent $20 bucks to close this _exact_ same type of BWB (broken wing butterfly) trade on NFLX (I had two lots), and it expired within 1 cent of my short PUT body strike! I spent $20 bucks, and made an extra $6000 dollars! So there you have it! I would've so kicked myself if I had just closed the whole BWB trade at the ~$240 floating profit I had at the time (on the Thursday before expiration). So, yeah, 2%... :D If I had always closed the entire BWB trade in one swoop (no extra debit spread), I would have to do this same trade 300 times before the extra $20 dollars in savings added up to the $6,000 I made on that one day.
@Galileo7of9 - yes, something is wrong then. I'll run a sim of your trade in TOS and see what's going on...
@Galileo7of9 ok, so the problem was you did the -3170/+3165 spread, but it should be the -3155/+3165 PUT debit spread for 0.10 debit. This shows a max loss of +$100. I was the in the SPX 24 JAN +3175/-3170/-3170/+3140 bwb until today, which I originally got for a 1.05 credit (shows as -1.05 debit in TOS) on 1/13. Today, my GTC order for the -3175/+3200 debit spread got executed for 0.10. Now that makes my position the +3140/-3170/-3170/+3200 PUT fly. TOS now shows this position with the cyan line at +$1016 at the base (max loss) and somewhere around +$6500 max profit (my position size was 2 lots). It's showing about $850 more on the "max loss" than it should because it's no longer considering the amount I paid for the 3175 PUT originally (which was $4.28 x 2 lots = about $850). Now is it more clear?
@Galileo7of9 - another way to look at this is: I have the 3200/3170/3140 PUT butterfly as my final position today. What were my net debit/credits used to get here? I'll read you my trade history: on 1/13, got in a 1.05 credit, and on 1/21 (today) got debited 0.10. So what's my net? A credit of 0.95. Now go into TOS and enter an order for buying the 3200/3170/3140 fly for a 0.95 credit. Hit analyze. Now do you see no negative values? Max loss of +$190, right? Of course, nobody would sell you this fly for a 0.95 credit because it guarantees them a loss (and guarantees you a profit), right? Also, no brainer, they wouldn't. So the only way to get a fly like this for a 0.95 credit, is to break up the trade, take that "time risk", and then later do the conversion trade. That "time risk" you took translates to your now guaranteed small profit, or huge profit (if the market crashes before Friday). And that "time risk" is potentially huge, remember - max loss on my original BWB was somewhere around $2300/lot and about $900/lot on your BWB (your lowest strike is much further inward, so you have less risk).
@Galileo7of9 - Yes, exactly!!
Good presentation but it could be improved greatly by illustrating the broken wing option trade on an actual chart and explain briefly what happens as the price of the underlying instrument goes up or down.
How about setting a similar BWB on the calls as well?
What is the advantage to doing a broken wing butterfly over a simple put spread
love the lesson will be watching multiple times bless.
Great video. Thank you!
Question 1: why the 10 Delta strike...why not, say 15 Delta for the short strike?
Qustion 2: Is there a weekly butterfly strategy with a very minimal capital requirement and high profil/loss ratio?
Would it be a good idea to do this on the call side also like an iron condor so you could make more money on the same capital or am I missing somthing?
Start at 11:57, watch it to 13:17 10 to 15 times, then start at the beginning.
Hey there, just getting started, dont understand anything you are talking about. Kinda like my chemistry class and learning the periodic table...doesn't make sense at first until one day...it finally sinks! I'm just not there yet.
Just know, unlike chemistry, you can make direct profits from these lessons. Also unlike chemistry you can incur massive loss. In risk we trust.
Probably the same odds of success as repeatedly betting black on a roulette table with a exit point. (E.g. if I lose x dollars or win y dollars I’m out)
Is there a benefit to using a broken wing butterfly over a regular credit put spread? Would using put spreads with the same 10 delta, 1000$ target profit, 2000$ stop loss give the same results?
A very honest and wise assessment. Thank you.
In looking to put on this trade I'm seeing the price difference on the put debit side of the trade is more than the difference on the put credit side. I'm not sure if that's just the market right now. Really want to try this but right now looks like it just locks in a loss. Or maybe I misunderstand it... I'll watch it again
Is it possible to put up a video on how to determine / calculate return on investment selling naked options. (call / put) If possible could you use the SPX ? Thankyou. Looking forward to a response.
Selling naked the loss can be infinite
This trade consists of two vertical spreads.
A) 10 put debit spreads:
Buy 10 $SPX 3045 puts = $-7,700
Sell 10 $SPX 3040 puts = $+7,200
=======
$ -500
Max Loss = $500 @ $SPX >= 3045
Max Gain = $4,500 @ $SPX = 3040
Max Loss = $20,000 - $1,800 = $18,200 @ $SPX
Do you have to be approved for naked option sells?
Even the market go side way, you would have profited upon premium decay toward the expiry. The hardest is to pick a correct short point. When too close, the risk would be too high, when too far way, the profit would be too small.
Is it relatively manageable for one person to use $100k 0r $ 200k to trade to generate say $2000 or $3000 per week? In other words how easily does this method scale?
It's one of my favourite strategies for income generating. One caveat though - it does require a sizable capital Thx...
Is it easy to implement??
Unlike many new trading sites that offer options education, this channel is the real deal. Seth is a real options trader. Great information.
How much capital is required for this trade?
@@jandolin he tells you in the video click here ➡ 10:44
@@insurancecasino5790 Thank you.
Great work. With Opvue now closed, which software do you use to manage your positions.? Thanks. Mick.
Is there a recent update on this strategy? Just trying to understand the strategy is still profitable in 2023.
Are these workshops still running in september 2020?
"We'll all be billionaires if our Back Tests worked in the future."
Quote from staff of CBOE.
This was great, thanks, I've been looking for "examples of options strategies" for a while now, and I think this has helped. You ever tried - Winoorfa Option Olegroson - (search on google ) ? Ive heard some pretty good things about it and my co-worker got great results with it.
Of course you can make a weekly income lmao look at tsla and appl not to mention the downfall of roku and fedex with the upside/downside of ba hell yea brother im 19 and trading is my income... im also a full time college student, i wish i was into forex also but thats a little more difficult in my opinion
Exactly. They are back testing, not trading. NEVER pay attention to someone who “proves” his strategy with back testing. Don’t walk away - run!
cdaddy20 people who don't have the knack in this field should stay away from this kind of biz. Stick to Rap
@@randallblake1213 pls check meaning of ur name in Indian language....RAND
Enjoy your videos. Very simple and informative for amateurs. Thanks for your efforts.. I have just started trading/ investing .. got some good profit. Looking for options trading now. Planning to take your workshop some time soon ☺️.
This would only work in flat or bullish markets. In which case, why not just sell a credit Put spread?
I'm interested as to why you wouldn't let the short puts run to expiration worthless letting you keep the entirity of the credit received from selling it and simply sell the long puts closer to experation to reclaim some of debit from buying them for a greater profit
risk management
Why not place one BWB above the market as well as one below the market?
Is thisstrategy still applicable in Feb/March 2022. It seems premiums 2 week out in the SPY has drastically reduced. Barely enough difference between (20 x Put at 0.1 delta) - (10 xPut $5 above) =$1000. And the bottom strike is so far out of the money or in this case doesn't exist that the margin required is quite large. Would one reduce the length of the top wing? Is it unadvisable to go out 4 weeks instead of 2?
What will be the expectation of the market trend for this strategy? should it be a bullish or bearish or side way? Can it be used at the call side and how? Thanks for your time.
I learned how to do covered calls and loving it
Hello Seth
This case study is based on the market rally and the index moved away from the strike price. But what if there is a market downturn, then how do you compute the loss? Thks
Why not just use Iron condor instead of the Broken wing butterfly?
If you're going out 2 weeks on your options then you could go out one week on one of your protective puts. I take it you weren't doing that here. Then what results could you have.
Couldn't you double this up by doing sort of a iron condor version of this by doing a 10/-20/10 call spread ABOVE the stock price as well? You would just have the same rules, 10 delta, 1 strike below, then go up until you find an option price that gets you just over your $1000 credit objective, but do this for a call. Seems like you could more than double your potential average earnings by having maximum gains of $2,600, and maximum losses of only $700. Whenever you would lose the entire $2000, you would automatically get the $1300 on the otherside, for a maximum loss of $700. The margin requirement still would
Ok,, so same strategy of selling 10 delta puts For all 52 trades? Or was it mixed depending on market direction bias and why $2000 as the risk per trade and not less? $2000 would represent nearly 10% of the total risk capital required by broker per trade. Seems kinda steep. I risk no more than 3% on short option swing trades and only 1% on long trades.
The webinar provides good instruction regarding selling puts, iron condors and bull put credit spreads, but nothing that is not taught in other TH-cam videos. However, over half of the over two hour course is spent trying to hard sell their 15 session online video course and lifetime coaching costing $1997.
They may encourage purchasing their products but their advice is solid and relatively bias - free
Agreed. The instruction was very good.
Hopefully people aren’t paying that much money. This is all very basic option strategies. Get a Natenberg from the library and teach yourself. I am not a fan of 1:1 risk reward ratios like in this example. I would look for strategies with a 3.5:1 risk reward or better. But these days options are priced correctly so you get what you pay for.
Can we do covered call options on index fund every month, irrespective of index price and just focus on getting premium on selling call option ?
Yes
Great video, I’m still new to options. My question to you is when looking at volume and open interest, are high open interest options the good choices to pick. Thanks 🙏
Or the difference the bid and ask
Overall open interest in the stocks options are more important. You can trade a strike with low open interest if other strikes have decent open interest.
The higher liquidity of a stocks options will be reflected in a tighter bid/ask.
Super confusing... Can you show the risk profile of this trade? Or an order / execution as an example? It's hard for me to visualize what's going on with the broken wing strategy and what the risks are. Thanks
I don't really understand why this strategy would be better with a broken wing butterfly than with a short put spread. You wouldn't need to buy the higher put and it would be enough to sell half the amount (10 instead of 20). Your potential profit to start with could be higher, in your example, instead of 1300$ it'd be 1800$ (as you'd save the 7700$ you pay for the buy) and even though your risk is higher, you'd get out anyway when things go south, you'd just need to get out a little bit higher.
But instead of closing the trade at 1150$ profit (or 1000), you can close it when you are at 1400$-1500$ profit.
Plus, you'd need to pay less commission as you only make 2 transactions instead of 3.
Ok to be clear, you just bet on red when they spin the wheel... Correct?
NO! NO! NO! You always beat on black!!! You have to keep that straight!
What if i dont want to buy shares of a stock and still want to buy call and generate regular income
Been paper trading this strategy and damn it profits consistently
@Galileo7of9 I'd make a couple of points. One: if someone's going to trade options, they really need to be informed and imbedded in market news and direction daily. That said, a firm assessment of COVID's market impact should've been an immediate red flag on 21Feb2020 and maybe an indicator to exit leveraged positions, especially with increasing volume heading into a weekend. Traders really need to understand when a shift in market sentiment has occurred. This is something that I don't know can be taught, but experience will get you most of the way there. Two: I don't like holding positions over the weekend for this very reason. It concerns me a bit that the video above suggests Friday entries are made - too many DJfnT wartwitter weekends in the past year to make me ever feel comfortable with long-biased positions. That said, I wish more strike price data was given in the video, so I could extrapolate the loss based on your premise. I guess I could look up the data or create a model but just don't want to. Three: paper trade it starting in late December 2018. The losses here will be minimal in context. Anyone can choose the best or worst case data set, myself included. Not everyone can be consistent. If one can't accept a loss, one shouldn't trade this way. Four: seems like the trade in the video executes over 10 days. That's a little more than a week, so not really within the original premise set forth in the video; however, will freely admit that I don't know if we're talking an average holding time of a week over the period tested.
Love the backtesting results you give. Thanks
What! No how to figure out and execute the strategy and close upon a draw down situation? Is it just when our losses approach $2,000 as best we can tell? Help!
@Galileo7of9 So are you saying you just closely monitor it and if losses approach $2,000 to close your relevant position? You talked about trying to have no more than a $2,000 loss?
@Galileo7of9 Thank you. Can you explain why you think this 'balanced butterfly' cannot lose and what is it exactly?
@Galileo7of9 I'll check it out. Thanks for your time.
@Galileo7of9 Well that is going to take a while to go through. Lol. Thanks. I may have questions!
I'd like to know why schwab told me this was a debit spread,not a credit spread. Are they wrong?
The world needs to know about Bitcoin because it`s the most important development earning approximately $12,000 from an investment of $1000 is really something very important to talk about . Thanks to Mr ben on insta @Ben_uptrade and I'm saying good bye to paycheck for good.
What signal you need to trigger this trade? and do you need a bias for this trade or a neutral.
This should be a bullish to neutral strategy
What would be the max loss on this trade is it capped
Max loss is capped at $15,020, which would occur if $SPX closes below the lowest strike of 3020. Loss is the same for any value below 3020, I will use 3000 to illustrate.
Net Loss made up of:
+45,000 on Long 3045 Put : (3,045 x 1,000) - (3,000 x 1,000) = 45,000
+20,000 on Long 3020 Put : (3,020 x 1,000) - (3,000 x 1,000) = 20,000
+1,300 on Net Premium from trade entry
- 80,000 on Short 3040 Put : (3,000 x 2,000) - (3,040 x 2,000) = -80,000
-20 for options commissions : .50 x 40 (entry only, options assigned at close assuming $0 assignment fee)
Don't forget to include these commission! High volume transaction fees sneak up on you. Running this weekly would incur over $1,000 in commissions on options, assuming a reasonable $.50 per contract commission. It can be worse with assignment fees depending on your trading platform.
The concept of this strategy includes NOT letting this max loss occur by closing the trade when you hit a $2,000 loss. Theoretically that makes sense, in practice you need to monitor the real-time value of the trade and there are certainly cases, such as a large drop on opening that breaches your loss limit where you can't exit quickly enough to stay below your 2,000. You should be able to avoid the max loss scenario under almost any circumstance. ALMOST any, but not guaranteed.
Where do I apply? I just got my options certifications!
Is there a way to put an order so that the trade will close automatically if price goes below 3045? Is that realistic as long as it doesn't gap down?
Don't you already have to own these contracts in order to sell them??? Or have enough money to own the shares or contracts first? And then enough money to buy and sell the put options? Wouldn't you need more then $2500 to play in the options market game? Since 1 contract is equal to 100 stocks of 1 company and equal to 1 contract share.
TH-cam is again not providing the link.
try links in description. TH-cam often has issues with displaying them in video.
I'm looking to use options to make extra money on options of stocks I'm looking to own.
this is all good but what is the roi% .. I'm guessing its below 2%, that's pretty low for the risk incurred here
Collect 1k on 25k margin in 14 days, stagger another position 1wk into the first trade, ladder & keep rolling, avg 1% wk return on pie (ROE)/10% return on slice (ROI).. if don't mind cap inefficiency and volatile PnL increment volatility/frequency of change/path dependency distribution to destination point of max credit collected
any update of this strategy 2020/2021 ?
Thank you for the information, I'm still a bit fuzzy though. Can someone explain to me what the main differences is between this strategy and a put credit spread?
The main difference is in the max profit . Credit spread max profit n loss is set at the beginning. BWB achieves max profit when the price actually drops to the sold strikes, which means the profit is not defined until the last moment.
A butterfly is basically a put spread - spread. In this example, you are buying the 3040/3045 put spread and selling the 3020/3045 put spread.
This trade consists of 10 put debit spreads and 10 put credit spreads:
A) 10 put debit spreads:
Buy 10 $SPX 3045 puts = $-7,700
Sell 10 $SPX 3040 puts = $+7,200
=======
$ -500
Max Loss = $500 @ $SPX >= 3045
Max Gain = $4,500 @ $SPX = 3040
Max Loss = $20,000 - $1,800 = $18,200 @ $SPX
I'm not understanding the appeal of this broken wing butterfly over just a straight bull put credit spread. Use the same short, and buy the protection 20 pts below, and use the same $1000/$2000 gain/loss. The trading curve is identical with half the commission, unless you end up in the small 5 pt "tent" on the butterfly at expiration. But you would have punched out before that point with your max loss anyway.
Are these strategies only apply to the spx index or can you use this in any stock?
Any stock. You may have early exercise and special dividends issues with single stocks though.
Why don't he just use vertical put spread for instead??
Fantastic overview! Thank you.
I only need a $500 week supplement ...however only been learning this stuff since a few months ago ...I needed a challenge and I can't climb Mt. Everest ..it's too far away!
What is the reasoning behind the 10 Delta?
90% probability that the strike with that delta will expire OTM
I really don't understand lure of trading weekly options, since the last week of an option is where traders will face the maximum gamma risk
If its weekly options, wouldn't it be the last day and not the last week?
Becuase the reward for when your right is so goood
can u lose money if u just do puts?
In my experience, back testing never gives the accurate win ratio and risk reward as when you try the strategy live. There are also many extra variables like fills, bid ask spread and psychology (e.g patient for targets) that makes this difference. Have any of your prop traders been trading this for a year, or is just the results of a back testing algorithm?
psychology is out of the equation becasue it´s a objective estrategy
@@haritzaldazaba is not. a lot of times traders can't have 1) patience to wait for the right entry 2) patience for the target to hit (a.k.a) they will take profit early 3) they won't take their loss when they should. all this play as well on any trade you do live. that, your backtest can't include
@@sistematico17 we are not talking about dicretionary trading. Those situations happen in discretionary trading, not in the type of trading the videos is about.
You're right it's not perfect but it's all we really got. Back test, then try it yourself with a small position, if it works ramp it up.
@@haritzaldazaba Agree. We can program/script the rulesset and let the "program" to execute!
Hi Seth! What sort of market conditions is this strategy best suited for? Any minimum IV requirement?
Do you recommend to do stop losses for intraday weekly option trading?
Good explanation
Thank you
Which brokers allow those transactions on the indexes? ($100/point)?
My broker want me to have the buying power before I place the trade.
Great video! I'm kinda of newbie in options trading and and based on the tradings I've done so far, I'm thinking of switching to a regular(plain) options or just stick with "Asset or Nothing" put options..Any advice or suggestions will be very much appreciated, thanks!
Well I think since you're a newbie and still finding your way around the whole options trade, you should stick with the asset or nothing trade because it's straight forward and less demanding compared to the regular trade which I believe is more profitable but requires lot of experience and complications for you to find your way around.
I'll have to agree with the sales rep. You should stick with the asset or nothing trade for now because it is far more easier to work with although the regular offers way more profits depending on the underlying assets though.
Me too! you'll need a much more experienced trader to help you out if you're trying out the plain trade, a trader who's been on this for long and knows how to work his/her way around it.. that way, you not only cut your loses and make maximize your profits, you also gain more experience and grounds while at it.
I couldn't agree more with Allen! There are a lot of things you've got to understand when trading options especially as a newbie, and it takes times to master and understand the various patterns so you can't just start trading on your own or you're most likely going to run at a loss, be discouraged and end up quitting which personally I believe is the wrong option.
Really glad to have stumbled on this, very insightful! Please can anyone recommend a good, well proven and experienced trader I can work with? Thanks guys.
I use charles charwb and dont see this option chain
hello Sir,
Could you pls tell me that where can I get option chain data for S&P500 index...???
where do i get 330 000$ to sell SPX option?
Hi Seth, does the 2000 loss include the 1000 credit? Ie. When loss hits 3000? From the way the you said it, it seems like close the position when there is a 2000 loss but if you take in the 1000 credit, it means its only 1000 loss and not 2000. Please advise
Hi Seth any comments on this?
Hi Seth, why are we doing it only on the put side ? Is it not better if we do this butterfly on both call and put side to get some cushion ?
Try modeling the risk curve to see the greeks and expity/T0 curves
Studies have shown that market go up more often than not. This is the edge in this PUT BWB. Also I believe 10 delta on the call side is nearer to the price. Need to check on that though.
Incredible video.
thx!