rknight52 7:41 am on Wednesday, March 30, 2016

SPX broken wing butterfly

STO SPX broken wing butterfly
Apr 8 2070/2075/2085 for 1.60 credit.
Max loss 3.40. Max profit 6.60.
Breakeven if SPX 2081.60

Bobbie 8:08 am on Wednesday, March 30, 2016

I thought you always buy b’fly. Please explain why you took this trade. I may learn something.
- rknight52 9:02 am on Wednesday, March 30, 2016
  
  Well, it’s something new for me, but is a defined risk trade (also limited profit). Basically buying a narrower wing call spread and selling a wider wing call spread, thus the credit. It is a somewhat bearish position, expecting SPX to be below the breakeven point at expiration. I got the idea to look at this today from TastyTrade. If you are ever on their site or use the Dough platform, they have good explanations of these. It is the first on I’ve tried, but it looked good and fit with my thesis for this market. I may be wrong, but if so, the max loss is defined here and the risk/reward looks good to me. I’m certainly no expert on this type of trade and may be out of my mind, but at least the defined risk isn’t big.
  - Bobbie 9:28 am on Wednesday, March 30, 2016
    
    thank you! I will put it in paper money.
Bobbie 10:00 am on Wednesday, March 30, 2016

Would you post the link for tasty trades video on this strategy, please? Thanks!
- rknight52 10:47 am on Wednesday, March 30, 2016
  
  Sorry to be so slow today…distracted by my “job”.
  This is a link on TastyTrade for broken butterflies: https://www.tastytrade.com/tt/learn/broken-wing-butterfly
  It gives a verbal description then several videos below. The first video by Mike and his Whiteboard is excellent. It explains it from a “put” perspective, but just the opposite applies for the call perspective (he mentions that in the video).
  - Bobbie 10:54 am on Wednesday, March 30, 2016
    
    thanks so much! no problem with slow answer. job comes first.