Butterfly Spread – Trading With Gangsters

One of the most solid, steady, robust, reliable, and profitable strategies available to us option traders is the butterfly spread.

In lazy, quiet market conditions there is very little – if anything – to do to manage these trades other than sit there in your chair and watch your trading account grow as your 0 day risk graph line rises steadily up into the air. In fact, it’s so hypnotizing that it’s actually sort of difficult to stick to your rules and take the darn thing off when you pass through your profit target for the month.

Then again – during the quieter times in the stock market – most likely the same is true for the other ‘option income’ strategies – such as the iron condor, the calendar spread, the diagonal – and the double calendar.

What sets the butterfly spread apart from the others is how this trade performs during extreme market conditions.

Ever since the crash in late 2008, theta positive, monthly income option trading has been a challenging endeavor to say the least. Sure, all those afore mentioned trading strategies can and have worked – however through many of the months there’s been a lot more work, adjustments, annoyance, and stress involved then in past more peaceful trading times.

Out of all of those strategies (and I’ve had the ‘pleasure’ to trade them all through this period) the butterfly spread – and in particular the iron butterfly and the broken wing – is the one option strategy that has been the most robust – the most consistent – the most reliable – and the one that has given me the least amount of problems – and the most amount of profits.

Sure, I still do like – and trade – the other strategies – like the iron condor, the credit spread, the calendar, etc…

I just prefer – in a big way – the butterfly spread.

Oh lordy.

I get all emotional and choked up just thinking about it.

Okay, here – let me try and pull myself together…

Basically it comes down to this -

If a low down dirty thug walked into my trading room one day and forced me at gunpoint to pick just ONE trading strategy I was allowed to trade for the rest of my life – I’d have to choose the butterfly spread.

Butterfly Spread – I love you.

Ah man…anybody have a kleenex?

Searching to understand more about how to trade the iron condor, then visit www.ironcondoroptiontradingstrategy.com to find the best free tools and training on the iron condor .

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Vertical Spread – Like Taking Yummy Candy From A Crying Baby

A preferred non directional trading strategy is the option vertical spread. This strategy is one of the easier option spreads to comprehend for newer option traders. In addition it is simple to place and there is not much to do management wise while the trade is in play – which allows the vertical spread trader to be freed from their trading chair and not have to watch every up tick and down that the market makes all day.

The vertical spread is a fundamental element to numerous other option spread strategies including the iron condor, the butterfly spread, the double diagonal and others. It if fairly common for beginning option traders to gravitate to this strategy soon after discovering options and once they have gotten their feet wet with the purchase of straight calls and puts, then covered calls, and debit spreads.

Option traders love to trade this strategy because the way these trades are constructed can allow the trader to be wrong and still make money. If the trader creates a particular credit spread position, he or she can win if the stock or index being traded winds up doing three out of four possible scenarios. If the stock goes down, the trader makes money. If the stock goes nowhere the trader makes money. If the stock goes up a little, the trader makes money. The only way the trader can lose money if the stock goes up far enough to threaten the vertical spread that has been sold. And even then, there are management and adjustment techniques that can be utilized to hedge against losses.

For example let’s say our trader is bearish on the stock XYZ. XYZ is trading at a recent high and our trader believes that the stock will not move any higher over the next 30 days. So, he sells a bear call spread – a call option vertical spread that benefits in a neutral to bearish scenario.

If the stock does move down as our trader anticipates, this vertical spread trade wins. If the stock does absolutely nothing and just remains trading at it’s current level, this trade wins. Even if the stock moves up against our traders outlook, this trade can win just as long as it doesn’t move up too much. The only way this position will lose money is if the stock moves too high too fast – in which case the trade could still be profitable just as long as our trader knows how to properly manage and adjust the position.

Mr. Ted Nino is an option selling fanatic – thoroughly enthusiastic about trading the iron condor . Stop by his vertical spread Website to discover more about his minimal paint by the numbers design for playing this strategy for dependable gains.

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Does The Iron Condor Strategy Actually ‘Do It’?

What exactly is the iron condor? This is a trade that makes profit when the underlying market being used is range bound. Of course options traders try to utilize strategies that can take advantage of movements in the market. Many times – and maybe most of the times – there is not a lot of movement and the underlying just trades in a range, leaving the options being traded to expire with no value on expiration day. These types of trading range markets are ideally suited for the iron condor option trading strategy.

You can imagine the iron condor strategy trade as a purchased strangle and a sold strangle. ‘Strangles’ can be both bought and sold and it is a trade where both a put and a call option is purchased some distance away from where the underlying is trading at. The premiums a trader can expect to take from a strangle position will be less than a straddle due to the fact that the options being sold are some distance away from ‘at the money’. A different way to imagine the iron condor option trading strategy is to think of it as 2 credit spreads – a bull put spread and a bear call spread. The long calls or puts above and below where the short options are placed at are the wings.

For example, let’s take a look and we find that the SPX is trading at around thirteen hundred and so we buy the jan call option at 1375 bringing in right around $245, and at the exact same time we buy the january put option for $4.38. If you are working with an options friendly broker – the required margin will be the difference between the two strikes – or the difference in the spread. In this example you would need around thirteen hundred dollars or so for this spread trade.

The calculation would be:

1380 at $2.45

1350 at $4.00

That’s around a credit premium that has been brought in of around two dollars or so.

$15 dollars minus $2 dollars = Thirteen – then times this by one spread (100 contracts) equals about $1,320.00 dollars.

Just as long as the underlying stays below the short strike levels the entire credit that was pulled into the account can be kept – which can be a very good short term return.

This is the call side spread of the iron condor trade we are referring to. To finish off the iron condor completely, you would need to add another credit spread – a put credit spread – down below.

This trading strategy can work wonderfully if you know what you are doing and the market conditions are right – and there are some option traders who use it as their primary trading strategy. But it’s not without its potential pitfalls and dangers.

Knowing which stock or index to use – as well as knowing how and when to properly place, exit, manage and adjust the iron condor is essential. And perhaps the most important of all of these is understanding how and when to correctly manage and adjust the position. If you don’t understand this strategy fully – or if you have a game plan that you will follow strictly – could be your downfall and wind up costing you significant losses. I know this from first hand experience.

To discover how to acceptably trade the iron condor methodology for steady monthly income, visit this iron condor site and catch our Free Video and get our Free Report.

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Trading Iron Condors – Riding The Iron Condor Spread Trade To Bring In Option Cashflow

A number of different techniques and strategies are available to option investors to help assist them in achieving consistent and reliable monthly income from the option market.

For example there is the butterfly spread, the iron condor , the diagonal (an/or the double diagonal), and the calendar spread, the double calendar spread – and, the vertical spread, which is sometimes also referred to as the credit spread.

The vertical spread (or credit spread) is a foundational trade that can be found in many other option income strategies. The iron condor spread is in actuality just two vertical spreads placed on either side of where the market is trading.

Also take a look at the butterfly. This strategy is comprised of verticals as well. One in the upper half of the position and one in the lower half. Also the iron butterfly is made up of two credit – or vertical spreads. A put vertical and a call vertical – both sold at a credit.

The vertical spread trade can be built from either call options or also put options.

Following is an illustration of a bear call vertical spread on the imaginary stock XYZ…

Sell 5 RIMM 50 Call Purchase 5 RIMM 50 Call

The vertical spread in the example above is a bearish position. Our hypothetical trader who placed this trade believed that RIMM would be moving lower – or staying in it’s general vicinity on the chart.

Some might think that because we are using calls this should be a bullish position, however this is not the case since we are selling the option that is closer to money, hoping to capture the time premium in the event that the stock moves down.

As long as the outlook on this trade is correct and RIMM stays where it is at or heads downwards, this trade will ‘win’ and the initial credit received when the trade was first placed will become the profit. Also keep in mind that this strategy can be used with both call options and put options at the same to build what is called an iron condor trade.

Want to find out more about how to trade the iron condor for monthly income, then visit Ted Nino’s site on how to trade this strategy as well as the iron condor for monthly cashflow.

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Riding The Iron Calendar Spread – Firing The Calendar Spread To Bring In Option Gains

The Calendar Spread is an option cash-flow technique that is loved by both pro option traders as well as the retail crowd to create a consistent monthly income.

The calendar spread is an option strategy that makes it’s money from the fact that options are an evaporation asset that loses it’s value over a period of time. decaying value. This is how the trade makes money. As expiration day approaches, the premium that was sold in the near month option loses it’s value – allowing the option trader to buy it back much cheaper than it was sold for.

To construct a calendar spread trade, we need to sell a closest month option while buying a later month option at the identical strike price. During the trade, the time premium in the closer month option (the one that was sold) loses it’s value at a much brisker rate than the option that was bought. This difference is how the profit is generated.

Following is a made up example of a calendar spread place on SPY: Buy 1 Aug 105 call. Sell 1 Sept 105 call.

While in this hypothetical example, the calendar position was made up of strikes on months that were right next to each other (April and May) – they don’t have to be built this way. You can use any combination of different months.

To prove this point, instead of using the December options in the trade example above, January could have been used. Or even February.

Ideally the the calendar technique is used with stocks or options that are trading in a range without a lot of movement. However, they can also be profitably traded in trending markets as long as the strikes who were bought and sold are near where the underlying ends up trading at expiration.

Since some option traders feel that the calendar spread is one of the most easiest option trades to manage, they like trading them better than some other option trades, like the iron condor, credit spread, and butterfly. Regardless, it really comes down to personal preference and in the end, all option traders would agree that this strategy is a wonderful technique to have in their ‘trade toolbox’.

To be taught more about the iron condor methodology, visit Ted Nino’s site on how to accurately place, exit, handle and adjust the calendar spread for ongoing winnings.

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The Iron Condor Strategy – Firing The Option Iron Condor To Reap Option Returns

The iron condor has two faces (and I thank the good lord above that neither one of these faces belongs to Babs – but then again, perhaps it’s even worse)

Usually when the iron condor and the new option trader meet, the iron condor comes across as this amazing beautiful trade – a holy grail type of method that almost guarantees success with every single trade. A spread that only takes a few minutes every month to put on and manage – and one that spits out consistent cash like a broken Las Vegas slot machine.

Of course, new option traders go gaga over this strategy – and who could blame them. It seems to be a trade that’s almost too good to be real.

And sadly, sooner or later (mostly sooner) they discover that it IS too good to be true.

But it doesn’t have to be that way.

See, the iron condor IS a magnificent trade – and it DOES take very little time to manage – and it CAN kick off outstanding returns.

BUT – and a big but here – what the gaga eyed option trader who is so head over heels in love with this trade doesn’t yet realize – is that this strategy can get a nasty streak every now and then that if not properly handled can completely annihilate all those amazing returns our unsuspecting trader manage to rack up. And then some…

It all boils down to the risk to reward ratio of these trades. They have a high probability of winning many small trades – but just ONE loss can completely DESTROY a trading account. And if the one trading these birds don’t realize and fully understand this – and more importantly how to properly manage these trades and how to make effective iron condor adjustments – before long they will get creamed and blasted out of the market possibly with a huge, unrecoverable loss.

But again – it doesn’t have to go down this way. The iron condor can be tamed – and trained – to produce consistent and reliable monthly income – even through the occasional one or two tantrums and fits it might throw around every year. The key is to learn how to correctly manage these trades from the get go – from the day they get put on – AND – how to utilize the various iron condor adjustments that are available to keep these trades profitable and from getting out of hand in whatever market condition. Learning iron condor adjustments is the KEY.

To find out more about the iron condor technique, visit this training website for scores of free training videos, examples, and tutorials on how to properly start off, exit, negotiate and adjust the iron condor strategy to yield a steady monthly profits.

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Iron Condor – Here Comes The Pain

In order to properly trade the iron condor, you need to have a game plan in place first regarding adjustments. Before you even think about what strikes you will use you should have this management plan already in place. If you don’t you could get utterly destroyed by a big move in the market or the underlying and you wouldn’t have a clue what to do. Remember, the way that the iron condor is set up, with it’s skewed risk to reward ratio, it could take a few of these – or maybe even just one – to utterly destroy your trading account.

Another way of looking at the iron condor is to view it as a sold strangle with purchased wings on the outer edges for protection. The strangle trade is an option trade where the one who is putting the trade either buys or sells an out of the money put and call on either side where the stock being used is trading at. Strangles’ premiums are less than those of straddles due to the fact that the contracts are out of the money. This is basically just a call option spread up above where the stock is trading at, and a put option spread position down below where the underlying is trading at. Your paired positions are the condor’s wings.

The reason it is so important to have a sound management plan in place before such a move is due to the risk to reward ratio that the iron condor strategy carries with it. By finding a way to put the probability factor of this option trading strategy in our favor we can use that to help us be much more successful with this trade. A big move either way – or even just a move in the underlying that is larger than you were expecting – can have disastrous results on your trade and your profits.

The Keys to Successful Iron Condor Strategy

- Know that there are different ways for adjusting iron condors. There isn’t a ‘particular’ way you you need to do so. 


- Protecting your profits and your account should always come first. 


- Never allow the inevitable small losses to morph into big losses. 


- Don’t get bored with taking small consistent wins.

Your key to success in trading this strategy is consistency in gaining profits. These profits must be protected. Adjusting iron condors must be done according to one or more pre-planned strategies whenever the possibility for a large loss looms.

I always used to make great monthly returns trading this strategy for a number of trading cycles in a row – but somehow always seemed to give it all up during the few volatile months that always seem to come along in a year. BUT – all that changed after I discovered this very simple to follow step-by-step method of adjusting iron condor positions. After discovering the methods taught at this iron condor website, I now know exactly what to do when a problem month comes along to keep from losing the rest of my iron condor profits I’ve accumulated throughout the year.

Ted ‘The Spread is an option selling zombie – particularly fiery with riding the iron condor . Visit his iron condor Trading Site to see more about his First-rate Smooth Plan to maneuver the weeklys for reliable profits.

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Trading Weekly Option – Romancing The Spread Trades To Create Weekly Options Returns

Standard call options was first introduced in 1973. The standard call options was born because of the CBOE or the Chicago Board Options. Put option become available into the market after the standard call options took place. The put options became very popular. Their popularity was manifested in the increase of trading volume which actually increases at a compound annual rate of growth over 25% between the years 1973 and 2009. The significant increase really portray that the investors know how to deal with the options. The overall increase was brought about by the familiarization of the investors on using these options.

The Chicago Board Options Exchange brings a new class option called Weekly Options in year 2005. Thirty two years after the first introduction of call options weekly options were introduced. The weekly options were called by investors as “weeklys”. “Weeklys” can be compared to monthly options by the investors. Weeklys only last for eight days while monthly options are not. The weekly options are introduced every Thursday and eight days later, Friday of the following week, they expire. Monthly options has twelve monthly expirations and expires every third Friday of the month. Weeklys per year has at least fifty-two expirations.

Options can be implemented with various strategies. Different tactics are currently available according to your chosen options. What are the best techniques for weeklys? With the case of weekly options, you can do just about any strategies that you actually use with longer dated option or monthly options. You may notice that these techniques can be done four times monthly for weeklys. While for monthly options, it can be only done once.

Investors are taking advantage of the final week of an option’s life. Having many time decay curves is one of the advantage of using weekly options. Investor earn twelve times when considering monthly options. Weekly option investments are given fifty-two times payment per year.

You may use the same strategies (like the Calendar Spread) for monthly and weekly options. You can sell naked puts and calls. Condors, spreads and covered calls are typical strategies that can be use for options. These strategies work well with the weeklys and also with the monthlies. The only difference is that they have a shorter time line.

To study how to appropriately trade Weekly Options Methodology for ongoing monthly earnings, go to this Gamma Scalping website and catch our Free Video and download our Free Report.

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Playing Weekly Options – Riding The Option Spread To Net Weekly Options Gains

The Advantage of Weekly Options

Short-term advantage can be derived from Weekly Options than monthly options. Being a short-term investment, weekly option provides its investors the freedom to anticipate price changes and movements.

For instance, investors can make specific investments on EFG stock because it would be better financially on a certain week. Going into a monthly option can be risky and your three weeks worth is at stake for that investment. Weekly option can be advantageous on minimizing risk since investments’ duration is limited. Weekly options can still be a viable option because it saves your money and provides good return if correct investments were chosen.

Most of the time, monthly option open interest and volume is higher than with weekly options. Monthlys have better pinning action than weeklys. Pinning action is an event when a price of stock went up due to a strike price on its expiration day.

Disadvantages of Trading The New Weekly Options

Of course, weeklys has its own disadvantages. One disadvantage is its short duration and quick time decay. There is no much time to fix mistaken investments. You will have a difficulty in adjusting your strikes or do some kind of mean revisions in the underlying security. Another thing is that not all of the strikes in the weeklys will have good open interest and volume. The strikes may bring extended effects that are not beneficial for short-term strategies.

Wrap Up

Investors of weekly options should know its advantages and disadvantages – especially when getting involved in Gamma Scalping. Investing on this kind of instruments may provide profit or loss. Investors should have full understanding of what they are doing and the risks involve in order to be successful.

To discover more about this Weekly Options method, click over to this Butterfly Spread Training Website for dozens of free training videos, samples, and tutorials on how to fittingly start, exit, handle and adjust Gamma Scalping Strategies to create a reliable monthly income.

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Butterfly Spread: Churning Out Monthly Cash Flow

A great system for option traders who feel the underlying instrument they’re working with will probably be range bound for the next 2, 3, or 4 weeks of time or so is the butterfly spread .

This theta positive option strategy produces profits when the stock or index that is being traded remains within a contained range on the graph or ends up on expiration day at or near the short strikes of the trade.

Here is an illustration of this tactic:

Buy 5 contracts of SPY 100 calls. Sell 10 contracts of SPY 105 calls. Purchase 5 contracts of SPY 110 calls.

These trades can generate quick gains for the investor as a result of the short strikes in the position (the strikes that have been sold) providing so much premium into the traders account. This is because the strikes that are usually sold in these trades are the ‘at the money’ strikes – or the strikes that reside closest to where the underlying is actually trading at when the trade is first put on. The ‘at the money’ strikes always contain the most amount of time premium, which is what option traders are looking to benefit from when trading these type of income positions.

While you can find numerous mutations of the butterfly spread, the two most popular are the standard butterfly distribute which is traded for a debit, and then there’s the iron butterfly, which is put on for a credit. It is true that these two individual versions of the butterfly spread are indeed different, if you would look at the risk graph of one and then compare it to the other, they would look exactly the same, and they actually perform the same as well.

The butterfly option strategy is a ‘delta neutral’ strategy, meaning that investors who use this technique do not have an opinion on market direction or believe that the underlying being traded will remain in its general location on the chart for the duration of the trade.

With the proper knowledge, the butterfly spread can be a lucrative, low pressure, and pleasant investing system that doesn’t require one to be glued to their computer screen stressing out over every tick of the market all day.

To find out more about this strategy, visit this Iron Condor Training Website for tons of free training videos, examples, reports and easy step by step instructions on how to trade the Butterfly Spread to generate a consistent income.

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