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BWB and naked put for 1x2x1x1 Net-Credit Accumulation Hedge
BWB - Brians news letter invest-x just gave a pretty clear indicator to watch for Nvidia earnings
Testing out a new strategy for 2024. Purely mechanical with a tiny positive delta bias.
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The one thing worth making explicit: once you stack the short call spread above price you have given up the butterfly's clean upside. A BWB opened for a credit with the wider wing below is flat to slightly positive if SPX runs away, but the vertical turns that into a capped loss zone above its short strike. So the combined position is not no risk to the upside anymore, it is a known max loss on both ends in exchange for the extra credit and the negative delta. Nothing wrong with that, just worth seeing the hedge as a second defined risk trade sitting on top of the fly rather than free protection. On timing the entry by IV rank, one caution. IV rank is usually built off 30 day IV, but at 70 to 80 DTE your vega lives two and a half months out. When the term structure is in backwardation the front can read rich while the vol you are actually short further out is not, so a high reading can overstate how good the entry is. I size off the vol at my real expiry rather than the 30 day proxy, and the vega negative pain a couple of people mentioned lines up with that since the body is where your vega is concentrated.
It depends on how I want to adjust, controlling Delta mainly. learned this strategy from myoptionsedge. They continue to trade it as well as myself. Now alone. I found the BWB on SPX and it rocks!
I did say "I think", because I haven't used TWS in over 5 years, but that is exactly how I traded butterflies where it was possible to collect a credit. Did you try submitting the orders? The BTO order shouldn't need to actually fill before you can attach a TP order, so you could try when the market is closed. Submit your BTO with a negative (the credit you'd like to capture), attach a TPO with a positive number like you would do with any other long trade, which a butterfly is(everything above zero is what you're trying to capture in excess of the original credit). If the platform doesn't reject them, then they are valid orders. The thing that is counterintuitive is that you're assuming that a trade is short just because it has a net credit. Whether you are a buyer or seller is to do with liabilities, AKA which end of the stick you're holding in the deal (the LONG end or the SHORT end). A regular butterfly is a long position, whilst a BWB allows you to collect a credit, your liabilities aren't changing structurally.
Once it closes, the value's locked. Deliverable becomes $3,100 cash per contract, so your BWB is worth $2 and stays $2 until expiry. OCC handles that part. The risk is all broker-side: an auto-close into a thin market below $2, or them wanting the $3,000 strike cash to exercise the 30s in the registered account. That's what I'd ask both of them. Also, IBKR definitely does auto-liquidate. They run a pre-expiry exposure check and will close stuff if the post-assignment margin looks bad.
I've not used TWS in years but I think you opened the trade using SELL "0.30", so TWS assumes that it's a short and limits your TP to the credit received. The reality is that a BWB is a long trade. I think that if you enter the trade as a BUY "-0.30", you can set a positive TP order that exceeds the credit received.
Would buying a strange be a better alternative to a single call or put leg? Or a couple of BWB?
Gotta love BWB's on the SPX, easy money in a flat market
I appreciate you taking the time and trying to help, but I don't use these charts for a reason. Besides knowing my breakeven already with mental math they have a huge flaw, do you actually find it helpful? Not trying to be rude genuinely interested. I'm only explaining this because I'm guessing that you want to understand the trade better? Sorry if I'm making an inaccurate assumption. I already own the 100 shares of MU. I sell covered calls so I only use round lots ( 100 ), you can't write a CC without 100. Not to mention mathematically while it can be done I think putting on a hedge when you don't own 100 shares of the underlying is inefficient. If it was me I would be deploying into sector specific ETFs if I didn't have the capital to go into the single stocks. I'm very fortunate to be in a position where I am able to buy the stocks outright 100 shares at a time, and I think being able to do this completely changes the game. I think the profit / loss diagram is not very helpful, all these tools treat trades as a set it and forget it rather than a position to be managed. Rolling and managing positions seems to get a bad rap, but on stocks like MU you're not crossing the bid ask spread that much, and with walked limit orders you are getting filled at the midpoint / slightly better. Not managing doesn't make sense to me. If the downside hedge becomes worthless due to a melt up you roll it up to lock in a new synthetic floor, taking advantage of volatility to lock in your gains. Simultaneously when the short body is tested you roll it down and out. I would probably roll the short body and the long wing together to keep another hedge in place, eg try moving the short puts to 840 and the long put from 780 to 800. Go for a net credit, compress them closer together when tested. I'm looking to do things like model if it's better to compress the puts closer together or if it's more optimal to move the short body as far down as possible. There doesn't seem to be anyway to simulate this and various strategies / scenarios. I'm looking for ways to model this management, as well as any research papers or resources in ways to model different ratios and ways to take advantage of the volatility surface, best practices to optimize the hedge ( rolling up at 5 or 10%), va keeping the wing of the protective puts in place and simply rolling the short puts up to create another BWB at the higher strike. EG the old 980 long put becomes the new wing of a BWB at let's say 1200 long / 1080 x 2 Short rolled from 860 / keep the 980 and 780 long puts in place. Likewise I want to see how this strategy would have worked on the QQQ and different ways to manage / change the ratios. My statistical analysis capability is above average, but I was terrible at linear algebra. I'm not able to model the Variance-Covariance of the strategy. Thank you again for taking the time to respond, let me know if I can clarify anything.
I am trading mainly BWB on SPX circa 90DTE at open, combined with a Vertical (there is a strategy called the SPX Best trade) and also 3 Calendars also this long on SPY (SPY Ride trade). I feel I have now a better risk control, even when the market moves against. There is a high flexibility on adjustments which are not so frequent. I feel calmer with this type of options trading.
For the SPX Best trade, I am doing a BWB below SPX price and a Vertical above. For the SPY Ride, it is a combination of 3 Calendar spreads positioned at a certain Delta.
With 70-90 dte, how do you construct your typical BWB? How wide is each leg? Is there a directional bias? How far the short strike is from current SPX price?
SPX BWB works great for premium collection — what DTE and delta are you currently using for your short strike?
I am positioning the BWB below the money (70-80 DTE). Only risk to the downside. 60/40 Wide on SPX.
I am curious about SPX butterflys in general. I tried 0dte double flies (calls above current price and puts below) but the results were just about a break even. One side would double and another one woud be worthless. One one occasion I would have tripled both legs but I closed one side for 2.5x and closed another one for scratch. If I let it run, it would've more the tripled later that day. What is your typical setup with BWB?
BWB is essentially a front ratio spread, but you use the little put to cap your capital usage. It does help managing IV spikes, but will drag your income. I personally do not like vertical spread due to binary nature of it. Front Ratio / BWB will make you money like vertical spread on an up move, but it could also save you in a down move. Pros: Safer Cons: Commissions + Spread + Lower Income In a larger account I would prefer Front ratio and then hedge when you need it. In a small account BWB is needed to let you enter the position with less capital requirement.
Love it and SPX fell into the tent of my BWB puts today. It aint happen often. But when it happens, your money is mine. Fuck you all!
Reduce your margin requirement by trading income strategies. I am trading SPX Best (BWB + Vertical) with sucess and does not consume a lot of margin. And uses SPX which is good in terms of taxes.
I think so... I am trading BWB and Vertical - this is called SPX Best. Not a standard Butterfly...
Not a good decision... If SPX continues down you will have a big loss... Under this high IV, it is better to open SPX Best Trades. It is a safer bet! This is a BWB and a Vertical. Basically, a non-directional income strategy.
BWB's technically have a slightly higher expected P/L at expiration, but their value fluctuates SO HEAVILY. It requires much more attention to manage. For instance, if the price action approaches your short strikes, but a a fast speed, you lose money, generally. Also, if the BWB is far OTM, it's decay due to delta is much smaller. BWB's only make sense to me as a versatility play. If you get blown out, you have one extra choice for managing -- you can close the long spread, and then roll the short spread. For most trades, I just prefer a plain credit spread, for the reasons above, and for the reason that you pay half as much in fees.
First of all, thanks for all your efforts and information sharing, include that blog post. But with all due respect, it (the blog post) is full of ~~bullshit~~ typos. > Call side (8 DTE): > Buy 1 × 6,125 call > Sell 2 × 6,150 calls > Buy 1 × 6,180 call > Put side: > Sell 1 × 6,070 put (8 DTE) > Buy 1 × 6,070 put (16 DTE) > Total debit: approximately $400-500. Maximum loss. First of all, the BWB above has max risk of $500, not counting debit paid for it. Then, no f$cking way you can open a week difference SPX calendar for $400-500. Well, maybe with VIX at 8, that might work. Normally (in med-VIX env like now, 15-19) it would be $1500-$2000. And $400-500 is a price of calendar with a single day (not even weekend!) difference in expirations. So, it really has to be a *diagonal* (as Flyagonal originally defines, you keep mistyping calendars as diagonals in the blogpost) if you shoot for 8-16DTE, and such skewed (i.e. to reduce debit) diagonal again has additional intrinsic max risk, similar to BWB. In the end, you end up with ~$2000 max loss for the structure, on $400-$600 debit paid. So, again, you certainly know all those facts, and just made typos, but imagine a person who, in 2026, thinks that if they paid debit for an option strategy, then it's their max loss. F@cking no, as soon as you start working with asymmetric structures like broken-winged stuff and diagonals. It makes sense for anyone interested in those "flyagonal" thingies to heed the warning from the blogpost above (yes, the one full of ~~bull...~~ typos): > The Flyagonal deserves serious consideration from any experienced trader already fluent in butterflies, calendars, and condors. For traders still learning multi-leg structures, the construction and management requirements make it premature; you need to understand each component independently before combining them. But diagonals and broken-wing butterflies explicitly should be added to that list, because dudes not familiar with asymmetric structures don't imagine how cunning they are.
Thanks for the explanation, the part that confuses me is does he still use a butterfly in the middle if yes what type ? For me it looks like an iron butterfly or is still some kind of BWB in the middle of both diagonals
I'd suggest starting with his original FLyagonal, let him run this new iteration a few more months. The secret sauce of the original FLyagonal is Vega convexity (Vomma), negative OTM Vega on the calls, positive OTM Vega on the put Diag gives the setup bi-directional Vega convexity....all drowning in positive Theta. His newest 8 legged monster replaces the call BWB with a diagonal, imo that likely negates the upside negative Vega convexity. He also states his most recent attempt was a loss, that gives weight to my point, he might wind up having to replace the OTM call diag with either a call spread, or the original BWB, which would then make it a 10 legged monstrosity - If it works, I'll take it.
You would futures to hedge not the ETF for FOPs. You can use smaller futures like MGC for GC and so on too. You can also use other options too. Using ETFs would be hard because futures carry interest in their price which means prices won't align properly There is also a lot less liquidity in GC and CL options than SPX which means getting good fills on BWB is going to be very hard. Expect most entries not to fill and same for closing them out. They're American options both of them. You can be assigned at any time. The only meaningful difference is the price of the asset is from the average of the last 30 seconds of trade.
Indeed. Avoid 0DTE options! Agreed. If you want to increase consistency in options, income trades are much better (at least from my experience). I moved to BWB in larger timeframes (80-90DTE) and it completly changed my returns. Lower but more predictable. I live well with 3-5% per month! I am doing the SPX Best and SPY Ride Trades from myoptionsedge. They're good. I was following them for about a year, but now I learned to process and trading on my own... not so complex and there is no need to adjust frequently.
I am using a BWB structure in SPX. Now it is a good environment to open these trades! You can see see more in this video that describes it: [https://youtu.be/s1uRLJFZODA](https://youtu.be/s1uRLJFZODA)
The loss is the inverted strike width of call shorts to the far OTM long call in the BWB, plus the cost paid for debit of the put diagonal. Risk is defined what you're saying is wrong buddy.
Why does everyone take it as arguing, discussing options everyone always thinks it's fighting like am openly learning from the conversation and exchange of ideas & perspectives. I agree no structure is perfect or without risk, all have cons and are useable for certain market regimes. Right now, Flyagonal seems well suited to play the downside while financing the cost with a BWB. Wait for a pop, look at news, open. I don't think would even use it neutrally just directionally in the direction think we'll go place the diagonal there and BWB other side to finance it
Consider 90DTE. BWB is positioned below the price. Also great flexibility when adjusting. SPX Best is doing great, even under these environments.
I received a credit from the BWB, used that to pay the put diagonal, and still had credit left over. If I thought price would appreciate, the put side would be closer to ATM, and the BWB farther OTM, since was bearish the put side went far OTM, and call side closer ATM. If was totally neutral unaware where price would go I'd place the put diagonal and BWB both as far out as possible which incur the highest form of debit, in this could I close the inverted width more to offset breakout move. There's ways to create this which matches perspective on where price goes. This still more effective than a double calendar so easily affected by vega
I'm doing the BWB for SPX, it found its easier if you buy a normal butterfly at a very cheap price first, then alter the outer wing for a credit roll. As the liquidity of butterfly is higher than a whole lot of broken wings, sometime it can result a huge bid/ask spread, but a normal butterfly + a credit roll is much easier in that case. However, I use IBKR, sometime after my rolling the spread of whole lot and position P/L will become a massy, which I will need to track on my own record, do you have any better way to manage the entry and exit? I'm thinking, might be buy a bear put spread and sell a bull put separately will help me better track the profit and close the leg when I need
The "abomination" is a volatility-neutralized theta play. I'm using the BWB to finance the Put Diagonal. It’s not about being clever, it’s about capital efficiency. You’re arguing from a textbook about clean Greeks, but I’m trading a structure where the components hedge each other's weaknesses. If you haven't modeled the T+0 interaction between a BWB and a Diagonal, you're just critiquing a painting you haven't actually looked at. That's ignorance imo.
A double diagonal is often a significant net debit because you're buying two back-month options. By using a broken wing butterfly on the call side instead of a simple diagonal, I’m generating a credit or a very low-cost structure. This 'pays for the expensive long put in the put diagonal, lowering my total capital at risk. The BWB creates a flatter T+0 line on the upside as well. Call diagonal can get hurt if the market rallies too fast and IV crushes, the BWB is more resilient to that specific up and crush scenario.
No structure is perfect? There's going to be a con to everything, so volatility expansion usually destroys most of structures, this is still better than opening double calendars. The range is wide, it's positive theta decay, better offsets vega, I mean feels like knit-picking. Even in the video you linked he said it's rare, statistically 5%, so the 95% win rate isn't far off. He didn't have the deltas correct either, and used a calendar where I have an inverted put diagonal, and he never accounted for the credit from the BWB. Too much ignored to take seriously.
Positions last week just fyi: -4 put debit spread 6625/6600 3/20 (am) expiry, bought 3/16 -4 put credit spread 6575/6600 3/20 (am) expiry, bought 3/19 (turned the directional trade into a butterfly) -6 butterfly spreads (6490/6500/6510 BWB), 3/20 EXP
Correct. But you need to understand how you position your Iron Condor, BWB, ... These may be used in a different positioning vs SPX price than the majority of options traders use them. The "usual" way if to have them in a Delta neutral posiotion... not my type!
I use BWB for the SPX Best. SPY Ride is with Calendars using the front month high IV vs back month
I like your sarcasms because I lack that defensive skill... :) My bread and butter is 0 DTE SPX strangle based on price action . And I also sell BWB puts or calls 21-30 DTE hedged with VIX + price action. I consider all tail risks including a flash crash or a 1987 style crash for every entry . I do this for a living and there is no room for any chance of a wipe out regardless how remote it is. As for OP, I can think of phrase "The best time to plant a tree was 20 years ago, the second best time is now".
He said BWB, which I assume means Buy Write Buy
Normie option strategies are astronomically risky. Better to practice the advanced options strategies and give yourself a better win % rate. i.e. Broken Wing Butterfly (BWB) put.
I am trading along some options strategies (income based) using longer dated options 70-90 DTE when opening positions... I live well with 50% annual return, only using Index options, mainly SPX. I use BWB structure with very good results. I do not want to spam here. They are delivering good results... a 50% annual return is my goal! I live very well with this goal!
Completely agree! It needs a proper strategy and avoid shorter-term. I prefer to open longer term (80-100 DTE). I trade mainly the SPX Best strategy with great results. This is an income strategy where you do not need to guess market diretion. It uses a BWB and a Vertical spread. Google it. Not to spam here.
Classic Implied Volatility crush. After the binary event, nobody is going to want to buy the contract and liquidity is going to be much more sparse. I'll have a BWB setup for earnings and even on MAG7 stocks it's difficult to get out the next day as nobody wants to buy me it buy me out of my position on at least one of the legs of the trade.
Most of them are stock oriented, but sometimes talk about options: Amit Kukreja (does a live open 8:45 AM for about 2.5 hours and a live close for about 2.5 hours) Steven Fiorillo (Compares the fundamentals of companies to other companies. publishes for Seeking Alpha) Future Investing (Technology & Fintech) Tevis (Deep dives into tocks....NBIS, BMNR, SOFI, etc.) Matt Money (mentions options every so often, but mainly chats about companies) MoneyVest (Does technical analysis, stocks, & options) ClearValueTax (An Accountant/Tax guy who chats various big picture News topics) Joseph Carlson (Stocks and gives great deep dives into companies he invests in) Investing Simplified (Very basic sound advice on construction a portfolio) All In Podcast (Big picture political views on the economy) Pandrea Money (Best education for options) BWB Business With Brian (Sound rationale for picking stocks) Blue Cloud Trading (Sums up the daily CNBC chats then analyzes the stocks mentioned using Ichimoku Cloud tecnjicals) Joseph Najarro Stocks (Everything Chips.... publishes for Motely Fool) TJ The Wheel Deal (Options) Options Play (Options) Paper Gains (Options, trading) How To Retire Early (Options....pretty good) Can you see my problem? I'm always trying to catch up on all of these channels!
I just close the trade if it goes below the price where I think the probability of the trade going in my favor has diminished. My losses are small vs my gains. Plus I get decent theta decay since these are weeklies. I do ICs as well and they have also been doing well. My losses on IC tend to be higher compared to BWB because of the steeper risk profile but I get stopped out much less so it’s pretty much a personal preference based on risk tolerance of the individual. Nevertheless, they are both effective.
interesting, my bread and butter is ICs. I'm still grappling with the pros and cons for ICs vs BWB, one big issue for me is that I don't see an easy way to adjust BWBs if they turn unfavorable. Do you have a mental stop loss where you close the trade if it goes against you ?
I'm trying some BWB, since everything moves very little or goes sideways. But it's due to the moment.
No, I am saying that if you want to go direction on SPX, better have a statistical edge... Obviously, you can have a BWB with a Delta bias
BWB spreads on SPY today to harvest volatility. Probably looking 9-10 trading days out
BWB spreads on SPY today to harvest volatility. Probably looking 9-10 trading days out
GEX matters when you're closer to the strike in question. ATM straddle is simply the assumption by the MMs on expected move at that time and things shift very quickly if vol changes. It's not static. Your BWB worked if you bought it early and kept it until near MOC. We stayed at the 60-65 level for over 3 hours so that's where the majority of gains would have come from if you had a fly there. If you felt we were going to trend up a simple call or spread at or near your center would have worked better. My goals for flys before 230pm is always convexity for less cost than spreads, otherwise just get spreads or single legged options.
There is no risk free money anywhere in trading. For a weekly BWB, you need a strong edge to be able to tell if that thing is going to lend in the tent by expiry. Longer DTEs are more forgiving about accuracy.
I netted ~16 on the up swing and ~12 on the down. I usually play BWB condors on earnings, which I did, then thought I should lotto cover my upside with 290/ 310 calls. Thank god I did because those four contracts covered (and then some) the loss when ORCL blew through my call side butterfly. Then I thought... this move is stupid nuts. No way, no how. Hit 10 300p at 350 and let it ride until the close Pure vibes. Got lucky as hell.
Ahh. My position is up over 230% on the BWB put spread. So how's your position doing?
Hmmm. I wonder who said "Needs to hold $176" And then what. It didn't hold $176, and then what. Lmaoo. I'm already positioned on Nvidia with a BWB put spread and still up 4%>. I would love for it to go up. So. What went wrong with the crackhead ICT method? Why didn't it work out? Are these institutional traders and hunting stop losses and all that garbage still here right now??
Your progression from 0DTE puts to more complex strategies shows you're thinking about this the right way - moving from high-risk speculation toward more systematic approaches with defined risk parameters. The strategies you mentioned (BWB, iron condors, put ratio spreads) are solid choices for market-neutral income generation, but here's what most courses won't tell you upfront: the real edge in options isn't in the strategy complexity, it's in timing and market selection. I've seen traders lose money consistently with "perfect" iron condors simply because they were deploying them in the wrong market conditions. Before investing in paid education, I'd suggest really mastering the mechanics of what you're already doing. Can you consistently profit from your 1DTE puts? Do you understand exactly why they work when they do, and why they fail when they don't? That foundation is more valuable than learning ten new strategies. That said, if you're set on formal education, look for programs that emphasize market structure and volatility analysis over just strategy mechanics. The best options traders I know spend more time studying when NOT to trade than learning new spreads. They understand that a simple put spread in the right market environment beats a complex butterfly in the wrong one. One practical suggestion: before paying for anything, spend a month paper trading those market-neutral strategies you mentioned in different volatility environments. Track not just P&L but also how much management each position required. You might find that simpler approaches actually fit your lifestyle and risk tolerance better. What's your typical holding period for these trades, and are you managing them actively or holding to expiration?
Hi. We are trading BWB and Verticals to manage Delta and capture time decay…
Shame. I actually checked Strat yesterday, for 5 points off ATM, a 5-wide call credit spread at 315PM ET cost 120 to make 380. But this is regime-dependent. 2023 wouldnt have given you this. I would take something like this over a convoluted 0dte BWB, knowing both will lose many many more times. BWB makes sense 45dte when you are trying to catch the knife.
if 1:1 is good, and knowing that it's a lottery, wait till 330PM, open 0DTE directional trade 10 points away when volatility is low, and 20 points away when vol is high, 5 points wide. That should be the most leveraged spread... Near expiry because of gamma, (or really because of the people rushing, that gamma demonstrates) you could get spikes every now and then... Yes it's fun if it's your lotto. BWB 0DTE is too cheap. Use it when you at least get hundreds premium upfront, for thousands max profit...
So your proposal is not relevant to my question then, because the thread was mostly on "converting BWB into a butterfly mid-way of its lifecycle". Yours appear to be of a more straightforward BWB in the duration of its lifecycle. This is a completely different question, but I will try to answer with my knowledge I have gained since, because there are some good mathematics involved here that people often overlook on BWB. I will try to get rid of the controversial, most likely disagreeable first: "Upside v downside BWB": I eventually got what you mean, but there is one technical issue here "broken wing to the upside" could imply both directions on BWB. Why? Because technically a short call BWB is biased to the upside. The volatility skew also agrees to this! Really BWB is a special case where the short put is to the downside, and the short call side is to the upside. So your proposal is not to the upside, because they (eventually) gain value as SPX moves down... not as it moves up... Language aside, because I know some people naturally believe short put = upside, short calls = downside. And yes short put BWB technically burns premium when SPX goes up, but gamma of the pin shows you actually want SPX to go down... This is superfluous: > What about BWBs on cash settle instruments like SPX, broken wing to the upside, allow for 50 basis points downside bias to the pin, enter the trade in the last 5 mins of market close expiring the next day. With SPX, you don't need to put it up 5 mins of market close, because they continue trading till 5PM ET/4PM CT. You could as well wait till 4:00PM ET, if the intent is to just wait till the "stock" part of the market closes. Unless you do mean to wait till 455PM ET. This is dangerous as you already mentioned, but newer BWB sellers often overlook: > **These BWBs can be cheaper to enter than a regular credit spread** also with better return above the pin for as much downside protection as you bake into the trade. By definition BWBs will reduce the credit you receive (if not move into a debit if too deep ITM to begin with) compared to a put spread. It introduces "max profit" on top of "premium received/credit" but this is where it can get messy. Because of how rare pin is, you can **only count on your net credit and not the max profit**. Because as you already say, 1% move happens 1% of the time. so about 60% of the time on any given day, SPX moves up, and you will keep the premium. 40% down days are mostly those 0.5%... so you will keep about 2x premium if generous.. with 1% of the times being >=1% day off and you lose close to max amount. Split that 1% 50:50 between successful pin and max loss... there is more beyond just the back-of-napkin Expected Value.. Well let's just look at the real maths. The price hasn't moved since 5PM ET (the actual SPX closing date on Friday). This is a good time to review the strat, because the prices are static. I try to setup the way you described. Typically the way Tasty does it - and I agree - is to make the long side 1/2 the width of the short side. This is how your proposal should look. We pin to about 40 points off. Then allocate 20 wing for the short, 10 wing to the upside. To maximise theta, you would want the long side as narrow as possible, while going either naked or wide as possible. But 2:1 width is reasonable for R:R optimisation. https://optionstrat.com/EkYmmJIDSGcf Credit: 30 Max Profit: 1030 Max Loss: 970 **Net delta = -0.03** Net gamma = -0.0008 Net Theta = 0.18 Net Vega = -0.67 Compare that to the Put Spread portion. Literally just the short put side: https://optionstrat.com/Cku9ckY1eAjY Credit: 170 Max Loss: 1830 **Net Delta: +0.08** Net Gamma: -0.0023 Net Theta: 0.36 Net Vega: -0.69 **Indeed a short put BWB is actually a short delta/bearish play...** For expected value calculation, very roughly: As you know 1% down days happen about 1% of the time. That's three days in a business year. Assume two days you pin successfully, and one day you just experience max loss. Reality is you probably just realise some gains in those two days... With 60% up day, 39% down within 0.5%, and 1%-1%-down days, assuming you earn 2x premium for these 0.5% day (likely to be zero to be honest but sure): 150 x 30 + 97 x 60 + 2 x 1030 + 1 x -970 = 11410. With Put Spread, with the same assumptions, if SPX is down 0.5% day, -6260/6240p would still give you full profit. Thus: 247 x 170 + 3 x -1830 = 36500. **This is a bad EV calculation**. The 40% down day likely also included when put credit spread is breached partially or when you gain 2x, 3x premium on BWB but even then it is just pennies... but still without any backtest software it is hard. But it's just how it is. For context as well: Compared to Tasty, Tasty does BWB for 30-45 days. Batista does this a lot. BWB volatility maths works against you on 1DTE, because the negative delta expansion of the short side work against you faster than the long side. It's hardly a cushion at all... They could turn it into a free symmetric fly because with the huge 30D premium they collect upfront, if they see they are profitable mid-way they could just have one for fun. It's just a fancy way of saying "We have got our lunch, this is just for the dinner." I know your question is very different, but the reasoning applies to you too... The credit is too small for 0dte. The volatility also means you either see your premium burn to 0, or you are in deep red. No in between. The calculator online (and the rough idea shown here) don't capture the acceleration of the acceleration (2nd, 3rd degree), and the rapid skew (and the rapid change of the skew) of 0DTE. I entertain your question because this year compared to 2023 could not be very different volatility-wise. You notice that you only earned $30 for 1DTE safe BWB... Back then a 1% off 1DTE BWB would not have got you credit on many days. **This would impact the EV too...** I would say given the skew and drift, your best friend for 0-1dte is actually just the normal ATM straddle (short), or short put spread at 30 delta. This gives you a very decent risk-reward....
Forget the 20 delta guideline for picking strikes, it's artificial. When you set your short strikes on single legs and spreads, as well for short midstrikes in a butterfly or BWB or whatever, try to set it based on a technical level, could be fibonacci or supply or demand levels or whatever your favorite indicator is. just picking 20 or 25 delta recommended by Tastytrade is meaningless. 21 days is another totally meaningless number. If you think QQQ will keep going up, you can roll up the short strikes on the put side for more premium, or you can add more short puts and turn it into a +1/-2 or +1/-3 ratio spread. Or you can roll the short calls strikes higher and hope it doesn't get tested. If you are scared it might keep shooting up to a lvl past your comfort level, say QQQ to 562, you can open another bullish call spread targeting that lvl as a counterweight, ie like a 557/562/567 butterfly. 50 DTE on a QQQ IC without any delta hedging is a terrible idea in general. You need to shorten duration now that market is making new highs.
Is a 150 point pump on SPx too much to ask? I just want a pin on my BWB
I've been following "Options with Davis". He believes as do I, this is a down market, and the strategy he back tested with the highest risk/reward under these conditions is a broken wing put butterfly. I'm doing it on SPY. I did subsequenty bwn, e,g, Buy 500 spy put, sell 2 py 480 puts buy 1 455 put for a small credit. Then put on but 1 spy 465 put sell 2 450 puts buy one 430 put for a credit. to extend the loss downward, and a small gain on the upside. I also did one at 524 put, and 3 more on the call side. (Nested BWB). We'll see how it goes in May. These are May exp. I also spent a few $ on put and call verticals around 450 on the downside and 535 on the upside. Davis only does these on the put side, and they work better on the put side. Next time I'll stick to the put side and figure out something on the call side, or just forget it, if the mkt keeps going up I'll have to be content with the few bucks from the put credits.
SPX Best options strategy uses a BWB and a Call Vertical to position the SPX price inside the structure, as I explained. Then, according to SPX price fluctiations it may be adjusted to capture more premium or reduce risk. What I can say is that it is very good to be opened during high IV. You can google it and check myoptionsedge website. No spamming here.
SPX Best options strategy! It uses a BWB and a Vertical. It is an income strategy that uses longer-dated options (70-90 DTE). It is producing great results in the last 3 years!
That's odd it never gets buggy for me when I have used it, only sometimes on non-business days the quotes get be wide which may distort it. To be fair, I don't actively use it anymore because I know the visual risk/breakeven in my head, unless it is more overly complex strategy (more than an IC or BWB).
I think when you see the word 'put', you automatically associate with with short. And now you're trying to cover you ass. Read your previous comment again. You said the long put butterfly is a 'bearish position' which is 100% wrong. Who is the 🤡 here? Butterfles, calendar or diagonal can be used to handle either long/call/neutral. And it doesn't matter what you use if it's a cash-settled index like SPX. Maybe you want to do one vs the other depending on the premium but there isn't much difference usually. I do a lot of BWB with puts so I'm just more used to looking at the put.
I have a 140/143/145 call broken wing butterfly Aug 30 exp for 30 debit. THE BWB is my go to earnings trade it's cheap and easy.
From the earnings results, you cannot deduce which way the stock will move. The only thing you can rely on is how the option chain looks before the earnings report (if you like playing earnings). By utilizing the distortions in the option chain and applying technical analysis, you can make relatively good options trades during earnings. At least, that's my experience. Using the above example with UPS, my idea was that I saw an indicator in the option chain showing a PUT skew, which I wanted to exploit. Additionally, I noticed strong support around the 0/8 line based on MurreyMath lines. From there, I only needed a strategy that would profit from the drop in IVR after earnings and take advantage of the PUT pricing skew, while having a break-even point well below a strong level. Hence the idea of a put ratio spread or a BWB. Therefore, **I don't want to predict where the price will go after the earnings report; rather, I focus on technical analysis and the analysis and visualization of the option chain.** I know everyone places their bets on heads or tails in the casino, but I think this is why one wins or loses 50-50% after each earnings. Let's not even talk about single long option trades, as that would be like shooting yourself right in the foot...
BWB is combo of both a debit spread and a credit spread.
We cannot tell you the future. And BWB do indeed have one direction where the credit is threatened by a loss. The trick is to have it move the other way.
I have a BWB right now on SPX that is pretty close to the money. Here are the strikes: 1 long at 5300c 2 short at 5315c 1 long at 5340c $1.10 credit received I set this guy up last week when the market tanked after CRM earnings and it looks like it could be a big money maker. Or should I be afraid? This is the issue for me with the BWB, i.e. how should I think about it? Most of the time you set one these up for a credit and they're easy money. But then the underlying starts moving and threatening that big ass credit spread and the fear sets in. But I'm thinking I should stick this one out and look at it as an opportunity more than a threat. I've got 15 points on the debit spread, which widens my zone of profit and even if SPX goes on a run my loss is capped. And a major run seems unlikely.
Check SPX Best strategy. Profitable and you can do it with SPY. Based on a BWB. Results are shared in the video: https://youtu.be/s1uRLJFZODA?feature=shared
Keep in mind with a ratio spread or BWB, there's a debit spread component. For that reason, I'd say high IV is less relevant. Its not a pure short premium trade, like a naked call/put or credit spread.
What is your strategy for trading iron flies and BWB? Im new in trying to trade these 2 strategies.
On $50k account. I should have said that in original post. Large size has one problem, when trade goes against you in a BWB or iron fly, the PUT or PUTS you sold loses more faster, so if you looking at the position, it would be down, say $3 k - $4 k then fear kicks in and I lost most of the trades this way. Same scenario with with small quantity, I don’t even look constantly until my couple of hours for theta decay
Can you please explain your trade in detail? What is BWB? What does 1-3 spread mean?
Yes, so the PVI ratio is all I care about to know where VALUE truly exists from the Options Pricing vantage point...it's an Apples to Apples comparison. There's a ton of ways to use this data & I don't do anything without the Macro PVI Spreadsheet each week. 1) DELTA Traders would need to decide, do I buy a BLUE Straddle or Strangle? or am I Bullish/Bearish and only want to play on 1 side this week (Long/Flat or Short/Flat). 2) THETA Traders- if the markets are GREEN...sell the higher RED PUTS after 10am and cover at the close. Put on a Fly or BWB to skew the trade. Sell OPM where PVI strikes are much wider. 3) Sometimes we get excellent LONG/SHORT or PAIRS Trade ideas that still needs more DD & Research. **CALL EXAMPLE:** $HD ($0.78) 17D have a PVI rating of 54 (Orange compared to SPY 38) $LOW ($0.47) 14D have a PVI rating of 35 (White & under SPY) **PUT EXAMPLE:** HD $0.89 17D w/ PVI 62 (Orange compared to SPY 48) LOW $0.55 15D w/ PVI 39 (White & under SPY **HD Strangle-** $1.67 (34 combined Delta) **LOW Strangle-** $1.02 (29 combined Delta) **IDEA if you're neutral on both:** SELL 2x HD Strangles- $ 3.34 (34x2 = 68 total Delta) BUY 3x LOW Strangles- $3.06 (29x3= 87 combined Delta) That **HYPOTHETICAL TRADE CONCEPT** gives you a $0.28 CREDIT, and you have positive Delta (19) as your cushion
More than burnt on iron fly ODTE in SPX during last hour rally. Decided to close put side and use the capital to complement the call side and rolled out far in time (30d ahead), hoping for a massive correction in the upcoming days. I also decided to converting the fly into a BWB, trying to limit the potential added risk.
Hey guys, as some knows Bitget announced the massive **BWB Airdrop** with bitget wallet. I'm so bullish on it, really think this one worth it so I'm trying to earn as much point I can. From **Mar 18 to Apr 28** Here his my refferal code : **9ZJPFe** [https://web3.bitget.com/bwb-airdrop?code=9ZJPFe](https://web3.bitget.com/bwb-airdrop?code=9ZJPFe) You earn too by using this code ! Official airdrop page : [https://web3.bitget.com/en/bwb-airdrop](https://web3.bitget.com/en/bwb-airdrop) https://preview.redd.it/kksqnk95gyqc1.jpeg?width=1920&format=pjpg&auto=webp&s=e1e32f4fe8a13c3d3b2d6736e688d0aff9773654
Hey guys, as some knows Bitget announced the massive **BWB Airdrop** with bitget wallet. I'm so bullish on it, really think this one worth it so I'm trying to earn as much point I can. From Mar **18 to Apr 28** Here his my refferal code : **9ZJPFe** [https://web3.bitget.com/bwb-airdrop?code=9ZJPFe](https://web3.bitget.com/bwb-airdrop?code=9ZJPFe) You earn too by using this code ! Official airdrop page : [https://web3.bitget.com/en/bwb-airdrop](https://web3.bitget.com/en/bwb-airdrop) https://preview.redd.it/i9s89fa4gyqc1.jpeg?width=1920&format=pjpg&auto=webp&s=a4cb4f07b233359f8135deb0bab61b9d74d828cc
Hey guys, as some knows Bitget announced the massive **BWB Airdrop** with bitget wallet. I'm so bullish on it, really think this one worth it so I'm trying to earn as much point I can. From Mar **18 to Apr 28** Here his my refferal code : **9ZJPFe** [https://web3.bitget.com/bwb-airdrop?code=9ZJPFe](https://web3.bitget.com/bwb-airdrop?code=9ZJPFe) You earn too by using this code ! Official airdrop page : [https://web3.bitget.com/en/bwb-airdrop](https://web3.bitget.com/en/bwb-airdrop)
Hey guys, as some knows Bitget announced the massive **BWB Airdrop** with bitget wallet. I'm so bullish on it, really think this one worth it so I'm trying to earn as much point I can. From Mar **18 to Apr 28** Here his my refferal code : **9ZJPFe** [https://web3.bitget.com/bwb-airdrop?code=9ZJPFe](https://web3.bitget.com/bwb-airdrop?code=9ZJPFe) You earn too by using this code ! Official airdrop page : [https://web3.bitget.com/en/bwb-airdrop](https://web3.bitget.com/en/bwb-airdrop)
Hey guys, as some knows Bitget announced the massive BWB Airdrop with bitget wallet. I'm so bullish on it, really think this one worth it so I'm trying to earn as much point I can. From Mar 18 to Apr 28 Here his my refferal code : 9ZJPFe [https://web3.bitget.com/bwb-airdrop?code=9ZJPFe](https://web3.bitget.com/bwb-airdrop?code=9ZJPFe) You earn too by using this code ! Official airdrop page : [https://web3.bitget.com/en/bwb-airdrop](https://web3.bitget.com/en/bwb-airdrop)
Hey guys, as some knows Bitget announced the massive BWB Airdrop with bitget wallet. I'm so bullish on it, really think this one worth it so I'm trying to earn as much point I can. From Mar 18 to Apr 28 Here his my refferal code : 9ZJPFe [https://web3.bitget.com/bwb-airdrop?code=9ZJPFe](https://web3.bitget.com/bwb-airdrop?code=9ZJPFe) You earn too by using this code ! Official airdrop page : [https://web3.bitget.com/en/bwb-airdrop](https://web3.bitget.com/en/bwb-airdrop)
Stacking weekly BWB's until they rocket.
So there is no hard and fast rule of 40-20 delta longs. It's very much dependent on volatility. I find it easier to just aim my risk profile (which is somewhere around +/-12% of max risk) for credit received. Of course, once you start reading the option chain through a lens that favors your entry parameters, the delta acts as a good starting point for strikes. I'm actually not hedging at all outside of the initial setup. This account is purely a strategy test to find out the numbers on win / loss and how it performs in different market environments. The bear traps are just that, they snap shut when the market bleeds off into the profit zone approaching expiration. I don't apply the trade with the intention of playing price action, rather, I respond to the price action with my exit/maintenance. If the spread only has a couple days left to expiry, and I'm sitting well outside of the sweet spot, I'll buy to close, free up cap, and look to open a new trade. If I'm within a few bucks of the trap, I'll ride it a bit longer to milk out some credit to close. Sometimes, the market will have a catalyst coming as I approach expiration, and I'll ride it out if I feel like I have a good buffer for a move against the spread. Everything about it is pretty dynamic, but it leaves you with a ton of options as a result. The "width" column in the sheet corresponds to the width of the broken leg of the spread. It's not very intuitive, but it acts as a multiplier for the math on the % of risk, risked cap, and number of contracts. 1 is basically 1 dollar wide (as with a narrow BWB) and 2 is for the 2 dollar wide broken condors. If I intend to scale this into wider spreads, all I need to do is count the dollars, plug in the number, and it multiplies my data correctly, as long as my ratios don't change. This keeps more of my data automatic, as I hate typing in all the info by hand.
Preferred bear trade - BWB
More and more, I'm finding that the short put is the king of strategies. It just has so much going for it because the general tendency of the market is to go up, and when it goes down you can often roll for a credit. So I do short puts (i.e. cash secured puts) and the occasional covered call and that works pretty well. However, I also do both debit spreads and credit spreads, diagonals (long), butterflies, the occasional strangle, and the occasional 2-1 ratio. But I would say the short put is the foundation of my emergent trading plan. The other strategies are sometimes profitable and sometimes not, though I am at least breaking even on those for the year so far. A strategy that I'm encouraged by right now is the broken winged butterfly (BWB) on SPX, mainly on the put side. I do these 15-30 days out and with the market going up like it is, most stay open less than a week. Obviously, this won't always be the case. I will also do wide put credit spreads on SPX, but fewer than I used to because even selling them way down at 16 delta, when they are 20 wide or more, it doesn't take much movement for the spread to turn negative. I came to these strategies because of the buying power requirement to sell naked premium on SPX. I guess if you have portfolio margin it's doable to sell naked short there, but for the rest of us it's just impossible.
I don’t have access to my laptop so I can’t pull up the risk graph on Think or Swim so I will try to answer your question based on the strikes you mentioned and trying to picture the risk graph in my head. First, your strategy appears to be a broken wing condor using all calls. It’s not a BWB butterfly because you have different short strikes. You will profit as long as SPY is below 476.66 at expiration. Max credit will be if SPY is between your short strikes of 474 and 476. Max loss if SPY is above 479 at expiration. This is a theta positive strategy as long as SPY is below 476. If it goes above 476, it will turn to theta negative. It is Vega negative and it is slightly delta negative. This strategy is a bearish strategy since one of you short calls, the 476 strike, is ATM and you have a long call at 479. That spread is a bear call spread. Sweet spot for this trade is between 474 and 476 at expiration.
Since OP wrote BWB, it may have been intended to be a butterfly with calls, but ended up a broken-wing condor with calls.
https://www.youtube.com/watch?v=dywA-5BWB8Q
I've only ever seen the "christmas tree" term used by Brian Overby who had a site called options play book or something like that. It's similar to the BWB except for the ratios which are like long 1, short 3, long 2 IIRC
A BWB is a long spread combined with a short spread of unequal width. They can be used for short-term directional trades, where the short spread reduces the cost of the long spread. Generally you want the underlying to move toward the short strike, ideally at expiration. Alternately they can be used for credit collection and you want the underlying to stay away from the short strike and you keep the initial credit. The long spread offers insurance against a quick move toward the short strike but you give up some premium. I find that plain credit spreads work well enough on their own. The real payoff for the BWB comes from hitting the short strike at expiration, but that rarely happens.
You place a spread and wait for it to profit by the amount it costs to add the broken wing. You then add the wing, effectively spending that profit to gain a risk free "home run" position if the shares land in the body of the BWB. It can sound a little complicated, but if you check out an example it should be pretty clear. Can't do a full breakdown atm sorry.
I trade butterflies fairly often, but broken wings only rarely. BFs are good for their high risk/reward ratio; ie, they're cheap and they pay big. Their downside is there are two ways to lose: 1) not getting to the target price and 2) shooting past it. The underlying price has to fall within the "net" of the high and low legs of the fly to profit. A BWB is a BF modified to deal with problem #2. It basically combines the potential rewards of a butterfly with the safety of simply being right on a directional trade. If the price overshoots the spread, you still make a (smaller) profit. For example, you're pretty sure AAPL is going to hit $200 next Friday? By all means buy a BF with $200 as the center strike. But if you think there's a good chance it will go even higher, then buy a BWB instead and collect profit if it falls within your spread without risk of losing if it exceeds your spread. So it's definitely a specialty trade you should only be making when the specific conditions warrant. No way is it a trade to base some general strategy on.
I guess the light bulb has not gone off for me regarding BWB yet. gonna play around on the sim and get a better understanding