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Testing out a new strategy for 2024. Purely mechanical with a tiny positive delta bias.
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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
Mid fills with some slippage is possible based on my experience. The slippage amount is varies from structure to structure though. I keep track of my entries, noting the mid price and the combo order's bid-ask range and the actual fill price. Then, use this information in my backtesting and set the slippage accordingly. ​ For a not too far BWB (e.g. [netzero](https://blog.deltaray.io/netzero-trade)) the slippage is around 0.05 for the whole structure.
I don't really get all of that, but yes, essentially, I'm selling a bit of tail risk to pay for the fly. I see it as a way to do low probability directional trades without incurring a debit, but at lower risk than the broken winged butterfly since the credit spread is narrower and lower delta than the broken wing part of the fly would be. I do understand that there's a risk of a sudden movement of the underlying blowing right through the fly and getting to my credit spread, but again, that's why I'm keeping it narrow and limiting the number of contracts. And actually, in a couple of instances I've set up full Iron Condors instead of one-sided credit spreads, which I believe gives me some additional hedge against a max loss. Also, I don't typically set up butterflies that far OTM as you suggested in your example. A more typical construct would be something like the following: 1 long at .45 Delta 2 short at .22 Delta 1 short at .08 Delta I would set this up 1 to 2 weeks from expiration. If I were to set this up as a BWB, the last long in that example would be even lower, but I don't do that as much because I'm not always keen on lengthening that part of the spread, and that's how I came up with the idea of simply adding another credit spread a bit farther out. And I don't do ratios because I've not yet applied to do undefined risk trades. This is on purpose and will likely be the case for the forseeable future.
Hi all, I've recently been experimenting with trading BWB's with a short DTE (between 1-7) to take directional bets on price movement with no risk to the opposite side of the direction I am trading by routing for a credit. However, one thing that I am still struggling with is determining how and when to close the position when price moves in the direction of my short strikes. From the few positions I have tried, it seems that I really can only close the entire position for a net credit on the day of expiration as there is still too much extrinsic value in the short options if I try to do so earlier than the day of expiration. I have thought of closing the long spread earlier when it is around 50% of the max value but my understanding is that closing 1/2 of the position opens me up to more risk in case price continues to move in the direction of my remaining short spread after I have already legged out of the long spread. Would this mean that I should only be managing these positions once the short options have dropped significantly in value below my cost basis (what I sold them for)? Any advice would be appreciated.
BWB is where you sell an OTM credit spread to buy a debit spread. At least that’s my understanding.
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I do this a lot on SPX when I don't quite trust the pump. With SPX the volatility profile is different. So I typically sell 0dte ITM or ATM call, and then buy one 75-80 delta long call 1-2 days apart. I try to create in such a way if it spikes hard up, I still get $150-200. If it reverts back to the short leg, I get $400+. When it works and it moves slightly down near 4PM, you make money. The goal is not so much to make good "% wins", but just to buy time. on Friday when there was that 40 point pull down, I had -4410c with the 4375C expiring this Monday. I did not close for $150 profit when they shot up to 4435. I kept telling myself this was suspicious, "I think we end 4425"... At 3:30 it then collapsed. I quit for like $300 when it reached 4417. Glad I did when I did because it did continue to go down and would have wiped it all out. This is the biggest difference to Call Debit! Had I had 4375/-4410C call debit expiring that Friday, when it was tested to 4417C at 3:30PM the whole thing would have lost money. My Diagonal actually gained money as SPX reverted back to 4410, at precise steps. It's "almost" similar to broken-wing-fly, but with better profitability. In terms of $ efficiency: Call Debit (PCS) / PMCC / Broken Wing Credit Fly. In terms of profit potential: PMCC/BWB/Call Debit. Just because PMCC/BWB do get more money depending on where it lands.
oh no that was just as a scenario analysis of sort. the plausible down prices indicate 15-18 point drop from 4393. certainly still plausible to hit 4370, and an absurd 2% intra drop would kill both was my thinking. I would say this starts to make sense if you are playing 45DTE and receives hundreds in credit. If you happen to be super right early, the BWB would burn so quick it is possible to lock in profit at 75-80% like you said. like "Ehh I got my weekly goal met, what else am I going to do without jeopardising myself?"
> In a case that SPX drops 2% from 4393 to 4310, a Free Butterfly would lose me zero, but these days don’t happen out of nowhere. If one is scared that -2% day could happen in an instant, why trade options to begin with But why 4310? Your break even point on the BWB is 4369.55 (4370 -.45). You start losing money if the underlying finishes below 4369.55 which is just a 0.5% drop from 4393. You may think that's still too much for an intra day drop, but that is the point of this strategy. You have a high probability trade on the onset, and as the trade progresses, you get an opportunity to remove all risk. The probability of losing is low, yes, but since you get the opportunity to remove that low probability risk you can choose to convert to a free butterfly. I personally only choose to do it when I can still lock in 80% of the credit I initially received. Like in your example, I'll only do it if I can sell 4335 and buy 4370 for a net debit of 9.
Well there's a similar condition with Short/Long Iron Condors. A lot of people open iron condors and there's zero reason to. If you're mid-range of a channel the chances are you'll lose more on one side than the credit received on both sides. If you're debit, you'll make less to one side than debit paid to buy the long iron condor. There's a concept I came up with called the: * No free money curve. It's basically a zone that the market maker breaks even. You'll be surprised how often price hangs out in this zone. I mean it's almost 80% of the time. I may at some point explain the simplicity of how to find this curve but you can basically see it in all price action across the daily chart. Anyway - the point is this.... If I open a credit spread to one side and it's making money; there's rarely a good time to open a credit spread on the OTHER side and still remain profitable. The BWB into a "Free Butterfly" sounds similar to the above concept. People open iron condors thinking they will make more money (more credit/more opportunity on the long side, whatever). The Free Butterfly sounds like a "hey I made some money, let's roll that into a new trade and make more money!" kind of mentality. I don't think the market works that way at all. Remember my other maxims. We either buy risk (sell our buying power) or we sell risk (buy some one else's buying power). This is the only transaction in the market that makes any money consistently. Everything else is just a bet on direction and there is no way to risk-manage a probabilistic bet; thus it's no more scalable or compoundable than just betting on a roulette table.
Yeah in your example, it makes more sense, even though I would probably walk away with 0.5 any day of the week rather than prolonging it. Thanks for the information. Yours make more sense than the BWB conversion.
Correct. In every instance that you could create a Free Butterfly you would also be able to exit for a profit early. The benefit of a free butterfly is that you have already locked in a profit but now have a chance to earn a much larger profit without any risk. In the example I gave you could potentially close the butterfly later for a $5.00 credit if the stock expired at exactly $105. I can't imagine ever doing a broken wing butterfly then bothering to roll it into a free butterfly. But I also don't trade BWB's pretty much ever. I do a lot of ratio's though so I do sometimes convert them to free butterfly's.
I haven't tried the ratio, I have only found the video where they discuss free fly from BWB. I cannot find the video with Sosnoff. To get you correctly: 100c/-2x 105: $1cr, this creates (104, 106) as your breakeven price. It has moved towards this zone, and thus you can walk away with 50% profit. (Worth 0.5). Instead of doing that (just like in BWB example), I would just buy 110c for 0.60. This means that the credit: 1.00-0.6 = 0.4cr. But you could just walk away with $0.5. In the BWB example, if the rolling indeed costs me < $0.45, I have got a free option, but looking at the timing where this is possible, likely the whole position could be closed for profit anyway.
https://www.tastylive.com/shows/from-theory-to-practice/episodes/how-to-set-up-a-free-butterfly-06-01-2016 They do both. > Typically, we pay a debit to put on a standard butterfly, but the Free Butterfly effectively entails ending up with a standard butterfly that you’ve been able to put on at zero cost. *This is usually the result of either a ratio spread or a broken-wing butterfly (BWB) that you’ve transformed into a Free Butterfly.*
Agree with you on all counts. It seems like this is just their "filler" episode. There is hardly any point to turn BWB to a free fly no matter the time frame that I can see. Weeks? Then the moment you could turn furthest leg to a symmetric fly, you could just close the whole thing for profit. Hours? Unlikely to go down 2% out of nowhere, keep the credit and set a close order. I also agree about spreads being a directional play, even when it is not obvious. When I was a beginner people tell me "oh hurrp durrp it is neutral it could go down a bit and you would still profit." But the truth is, the sooner the stock goes up, the sooner you can close for profit for PCS, and the sooner the stock goes down the sooner you can close your call credit. On over-management, yes I think we are inclined to manage things, and screw more things up. Right now I am more of the mindset of "not looking great? Close. Don't roll the untested side don't do anything fancy." "Not looking great" can be based on speed of movement, acceleration, or just decay not going as fast as I want (aka volatility expansion). Thanks man!
as to what the question really is... I was just wondering "when does turning BWB to "free butterfly" like this make sense at all?" I just cannot find a sensible "opportunity" where it makes sense to do it rather than just letting it ride.
firstly, love Tom Sosnoff and Tasty. A balance between "playing options to add value to the portfolio" and "analysing and managing the risks"... but I cannot see value in his "free butterfly". Free butterfly is this: First open a broken wing fly for a credit (call it $100). Then roll the furthest long leg into symmetric fly for less than or equal to the credit received. I sold a broken wing for the lol 4335/-4375x2/4380 for 45cr. I had a chance to roll 4335 to 4370 for "free" after commission and all that. But why would I do that? If I did nothing, realistically I am either going to win 45cr, or somewhere between $200cr if SPX finish at 4378. That will account 15 point drop from 4393. On the other hand, if I roll to create "free butterfly", I will lose that 45cr, and then I will need to bet on pinning the donkey to win further credit. Likely end up with zero debit or credit. Sure SPX could drop two percent from current price, but then it is probably so unlikely that you shouldn't play options anyway if you don't want to risk it, no? Besides if it drops towards 2%, either the BWB or the "Free Butterfly" would hopefully net money in between now and closing...
I woke up properly this time, let me rephrase my slightly obtuse point: 1. From your comment replies you are not a beginner. I was not trying to make it about wealth bragging. I myself am a small fish, but decent for millennials in a crisis. But Pt 2 is why it matters. 2. I misunderstood, I was originally thinking he was opening per contract. 1000 gain for 2000 loss for one contract would have been gambling on SPX. But this opens up another thing, he was betting 10 contracts at a time. I don't think anyone of us can risk 20K at a time. One contract's stop would be 100 gain or 200 loss. I reckon if there is a way to reliably bet that with a full-time job and set and forget, I would take it. But see Pt 3 and 4. 3. You realise he was not looking for the tent, that's what makes me think, this is all just flashy trick to get people to sign up for his course/server. There is a way to hedge by making it a ladder. Example: sell 20 delta short, buy 15 delta long PCS. Then buy 5 delta protective put for the tail risk. This makes a bit more sense as the protection is cheap and not intended to make you profit, but rather just there to reduce it. 4. I am thinking the reason why so many fintubers made videos about BWB was because beginners opened it, and then it gets tested, they are not patient/stop loss triggered, so they look for ways where they could profit both ways. I thought about this too, and I sell butterfly for different reasons to him. "If my PCS at 10 delta was red because SPX was slightly down, it would make sense if I had a bearish part near it, my position would be green fast!" The answer is no. The bearish just becomes a drag (as it is a debit), and because the width is smaller than the PCS portion, if SPX is trending down, you will still be in the red. With flies you want "good pace" towards the centre. 5. Conclusion: For weekly PCS/put ladder is better. Close the whole thing if this protective becomes 300% fast. The protective put can also serve as acceleration indicator. If they truly 2x-3x fast, your PCS is probably in danger. But again this is not "set and forget".
If he bought 10 BWB this is not for retail. Not insulting him but they always sell you complicated stuff like this to look flashy. How many people can risk 20,000 per week? You are not getting $1000 from just one. It makes sens now. BWB sounds appealing because if it ends in the tent you win big… so people who want to try out think as stock goes down they are looking at 6x the original credit.. not so fast! It will be in the red as it goes down fast. Just like PCS, but at least with PCS you get almost twice the credit.
Thanks a lot for the feedback, some great thoughts there. well you could scale the size down or up and use the same deltas, he does it with 20/10/10 contracts you could do it with 2/1/1 at the same delta. what are the pros / cons of the PCS vs the BWB? you can do the PCS at 10 delta but use more contracts for a similar risk/reward, you don't get the tent zone, but the strategy as taught you aren't aiming for that anyway, BE is similar, so yes i'm wondering why bother with the BWB
what's your liquid cash? if you want to test out people's method, you cannot change their delta or width because once these things change the decay and premium rate will change. Not to brag, but the way he explains it non-chalantly "close when you are down 2000", it probably mean he at least has 30-40K. If you don't 20 point is nothing for SPX, so be ready to take that big hit. you probably will not need 28K if approved for spreads selling, because the way he sets it up at 3025, that's your maintenance margin/collateral (3025-3040 is 15 point). if you want income from options you must be ready to make it a job and manage it. otherwise you will eat max loss after max loss in no time. > Exit the trade when you are up $1000 or when you are down $2000 Since you are ready to set these stops, you are **actually better off selling put credit spreads**. The long bear put portion in this reduces your credit received. I also don't think you will get $1000 credit on a 15-wide without encroaching gambling territory. I am looking at around 400 for 2 weeks at 10 delta for PCS, with 100 point wide. BWB will cut that in half because the bearish put spread portion will reduce that. It can be argued this is not bullish but bearish, because you gain more when it **closes** around the tent. But be aware if it moves too harsh to the centre that exit strategy will close in no time. If it goes up fast, you keep premium, if it goes down fast, $2000 is nothing and your stop will be triggered.
On big down days I sometimes sell a bullish BWB if I can collect enough credit.
Damn I gotta read your post again cuz I’m sure I missed some good stuff! Trading is such a cool thing to me because there are so many different strategies and lenses to look at the market through. I’m pretty ignorant to the market-making game or the super-computer quant stuff. I just know a bit about discretionary futures and options trading. I’ve developed a pretty decent working knowledge of how implied volatility fluctuates on an intraday basis. I’ve pretty much exclusively traded SPY options every day for the last three or four years. Most of my trades currently are relatively short duration swing trades using 7 to 40 DTE SPY BWBs butterflies and condors. The premiums aren’t exactly what they used to be, but I’m still trying to be a net-seller in most cases. I have been doing a lot of trades where I start with one spread that is somewhat directional and then later on if I get the move I want, I will overlap another spread for credit so that my overall position is still slightly directional, but also theta positive. At least that’s how I park my position overnight. Think a BWB where my long wing is ten points and my short wing that is further OTM is 15 points wide. (My rule of thumb for net short directional BWBs is to base everything off how much premium there currently is ATM, so if the ATM calls are trading for 10 and stock price is 400, then my long wing will start at 410 and will be ten points wide. My short wing is 1.5x the width of the long wing. So that would be a 410/420/435 call BWB. ) that basic formula has held up almost for every ticker. I have been trading based off market profile theory (Jim Dalton, Shadowtrader) and am a firm believer in those concepts, especially value and excess. I just mention this cuz it took me so long to find my niche and I had to weed through SOO much bullshit and so many people who were full of it. And then figuring out how I could use those concepts to actually be profitable myself. It has been such an eye-opening experience. I’m totally open to the idea that there are data driven strategies that work, but I just don’t think about it like that. Or maybe I am using a data driven strategy but I just haven’t taken the time to collect the data. Haha. Do you trade a lot too?
BWB or a diagonal would both work
I also have a ton of commissions and fees racked up at tastyworks. However I think they have the best platform for options trading. You won’t really be able to BWB or iron condors at fidelity, at least not as easily. I would be mindful of fees moving forward and work it into your trading plan.
I got fucked on some amazon debit BWB i feel you.
It's not that complicated; you can check the Job Definition tab if you would like to see the rules without the commentary. In one sentence: 70DTE BWB with legs at 20/40/60, held for 30 days with some exit conditions. ​ Hope this helps!
My amazon BWB and call debit spreads got bent over the barrel today.
I have more time on my spy position but i need some upward movement from amzn this week. $101-101.50 puts BWB in the profit and i can exit
I think an OTM BWB is less risky but provides less premium and costs more in fees.
Some people don’t want to take that uncapped risk with a ratio vs. BWB, nor have to deal with dynamic BP. Ratios will generally be better as they are more flexible since you aren’t buying a protection for your naked short.
Credit spread pro is less slippage and less comissions. I don't think of BWB like Flordamang's roulette analogy. i think of it more like a credit spread with a smaller debit spread hedge. Assuming you set them up relative to short strikes. BWB is more vol neutral and has lower delta. It's comparatively better when the stock moves against you and if IV expands.
I don’t feel like doing a huge write up so I’ll just give you a quick take. Broken wing(1-12) vs Bull Put Spread(Black) is like a roulette bet on 1-12 vs Black. Your short put strike on the BWB is a high conviction bet that the underlying will be around there. The Bull Put Spread is just a vanilla credit spread where you’re betting the underlying will be above the short strike.
Sell calls, BWB, or verticals Buy put diagonals, calendars, verticals You can buy a put, but there’s no management besides rolling for a debit. Therefore, you have to be the most correct out of all other strategies
Might even be able so tell the long calls on a drop of vol pops hard as well. Either way I think it is a good trade. I’m hitting mostly short call BWB in my account until we get signs of a sustained rally.
I have the BWB depending if the trend is bullish or bearish, so for instance I have right now two BWB for 21st of Oct: NVDA Call 130(1)/135(-3)/160(2) for -13.98 of credit, POP of 63%, Max risk of 3140 and Max Profit of 1860 V Put 185(2)/200(-3)/210(1) for -2.83 of credit, POP of 69%, Max risk of 1814 and Max Profit of 1186 So usually the body of the BWB is ATM and then the wider wing is between 1 std and the ATM strike price so I can collect at least 1 of credit, the theta/vega is bigger than .2 and the POP is more than 60%. I tend to check if the trade is a loser between 12:00 and 15:00 so the high volatility is not playing against me. So my goal is to refine my Risk/Reward ratio so I can manage better those loser trades and improve my PnL.
Hard to give any kind of useful advice without at least one example trade. How are you biasing the BWB? Bull or bear, and by how much? What are the wing spans? Heck, debit or credit even? Too much missing information. That said, a good way to analyze risk/reward is to compute your break-even expected value. You either fix the win$ (or win%) and let the loss$ or (loss%) float, or the other way around. Break even EV: 0 = (win% x win$) - ((100% - win%) x loss$) So if you fix your win$ a 25% of max credit, whatever that may be, and you assume your win% is somewhere in your PoP range, say 60%, you can calculate what loss$ breaks even. That defines your risk/reward (loss$/win$).
Update: well RUT continues to run up. I opened a 1965/1979/1980 put BWB to try to reduce the pain. That’s likely to be closed for over 50% profit in the morning. By close tomorrow im planning to open a 1995/2005/2010 put BWB on top of the original 2000/2005/2015 call BWB. I figure im at max loss already so opening this will either: 1) reduce my max loss by about $90 2) possibly come closer to breakeven 3) if i get crazy lucky (i mean how the fuck lucky) RUT closes at 2005 on wednesday and i make double original max profit. Not counting on it at all though. 😂
I’d say in general practice yes, it’s a good idea but the RUT is incredibly overextended and I’m not sure adding downside risk a good option for 5 days left in the trade. I’d favor closing it and opening a new trade with your original delta levels or adding another tranche to your current position for a better credit. Cool idea, by the way, for the 5-10 BWB on the rut, I’m going to check that out on some back testing. Favoring staying on the put side with bullish tilt heading into sept and Oct positions.
How did your BWB get blown through within 2 days? What are your strikes and how long out.
Thank you sir. I will look into BWB
Interesting...looks like the broken wing fly would have 25 margin. So that would work given the debit is only 5. Can run 4x of these. I was fiddling more and trying to find a "free" BWB by financing it with deep OTM credit spreads. Look at this nonsense: [https://optionstrat.com/build/custom/SPX/.SPXW220520P3950x4,.SPXW220520P3975x-8,.SPXW220520P4025x4,.SPXW220520P3700x-4,.SPXW220520P3675x4,.SPXW220520C4500x-4,.SPXW220520C4525x4](https://optionstrat.com/build/custom/SPX/.SPXW220520P3950x4,.SPXW220520P3975x-8,.SPXW220520P4025x4,.SPXW220520P3700x-4,.SPXW220520P3675x4,.SPXW220520C4500x-4,.SPXW220520C4525x4)
BWB pins, you fire and forget hope it hits your strike price by end of day for 10X payout
I’ve never had any luck with straddles, everyone that I’ve ever put on; the velocity has been so high that it ends up forcing me to lose money and invert. That and BWB!! I guess wrong every single time.
It is delta neutral (other than fractions of a penny short delta...but that is usually the case with iron condors... they tend to be short delta due to downward volatility skew. Once set up you win every which way... basically the same Greeks as an iron condor... short vega / long theta The only real difference here is that you end up with a larger credit than the width of the spread. That is of course if you're referring to my trade and not the BWB adjustment I mentioned... which is of course a long delta strategy for puts and a short delta strategy for calls
That's possible! For me, it depends on whether I want to make money from the market going down or I want to make my overall account PNL less volatile. For the first, I've been looking for opportunities in an another ETF that kind of sits still or is on a down move. I’ve sold call credit spreads on GLD or GDX and recently a call BWB in XOP. For the 2nd, I place some neutral trades in one of the ETFs. Overall I prefer to be long on SPY, so my account leans long... the way I’ve been taking opportunity this bumpy year is by selling put credit spreads when SPY is going down and volatility is high. I’m usually able to take these off within a couple days. (Usually aiming for 30% on high iv trades.) Hope that helps!
Is there a repair strategies for option positions if things don’t go your way? For instance, last week during the unexpected bull run, I had a 1/3/2 unbalanced BWB that when I first put on, it was pretty much a .05 delta I can’t close it out or else I’d be PDT’d but almost a week later now I realized that had I did the same 1/3/2 going through other way, I would’ve minimized the max loss to about 1/4 of my original BWB due to the gap up So I was curious if there’s a list of, “if CCS isn’t working, do this…” etc
You’re going to see a lot of posts of directional bets pay that off for a lot of people over the next few weeks. Some people will get really lucky, a lot of people won’t get lucky. I can’t offer real insight without several hours of instruction - but my current SPX position is a 10lot 60 - 40 put broken wing butterfly- I chose the strikes because I wanted a +20 delta position and then I bought a put at 10 delta put to hedge off downside risk. I hold the put until Wednesday or Thursday depending on move - if we get a break below 4200, I’ll roll position back and maintain a positive 8-12 delta range - in high IV, the BWB is a credit so I’ll keep no upside risk and keep the hedge on. If we shoot up from Feb meeting, Ill leave it with the current credit I opened the position for. In regular environments Is be in a symmetrical butterfly 70-point wide and I’d hedge the negative delta with a call, but I did not like the trade for Feb and may open one for March if the range has been established. Both positions are relatively neutral and can handle these moves fairly well.
Second this. Got crushed on a BWB I opened before this massive drop
It depends on your confidence level on the size of the move and how fast. If I was confident of a break of 470, but thought I’d get a short term stall, I would calendarize at 470, 3-7 days further out in time for the long. If I thought it would break and go to 475-480 in 10dte I would buy a call 465-467 3-7 days further out in time and diagonalize the position…strike selection would be dependent on the initial credit from the strangle…with the IV pump today you could get away with a 465/470/472 BWB, or a 465-470-475 butterfly on a stall play. Lots of options.