Butterfly Option Spread - 10x your money each week!
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- Äas pĆidĂĄn 2. 08. 2024
- An options strategy designed to make up to 50x more money than it costs to invest. An in depth look at this amazing trading strategy that offers lower risk, higher profit and easy enough for beginner option traders to understand. This is a great alternative trade to selling puts and can generate amazing monthly and weekly income in high IV environments.
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⏠CONTENTS âŹâŹâŹâŹâŹâŹâŹâŹâŹ
0:00 Put Ratio Spread Overview
1:34 Pros of Butterfly Spreads
2:33 What is a high IV Environment?
2:55 Last week's Trade returns
4:25 Cons of Butterfly Options
5:46 Why it's called a butterfly
6:27 Breaking down the bearish put Broken Wing butterfly
6:48 Setting up the trade in IBRK
8:13 Understanding the risks
8:42 Last day of the trade
9:21 Drawbridge Rolling Options Record Keeper
9:44 Entering a trade in the ledger
11:18 Determining Margin Use based on Max loss
12:30 Closing the trade for Credit
13:40 Butterfly Debit Spread 10X your investment
15:28 Download the spreadsheet
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My primary investment strategy is long term high yield dividend investing, index funds and reducing risk and exposure using options. I have been actively trading the stock market for over 25 years and have built most of my wealth by reinvesting my dividends and following my 14 Personal Rules of investing. I actively trade options on both the American and Canadian Stock exchanges using options strategies and buying and holding high yield dividend paying stocks.
I generate monthly income in two ways. Averaging more than an annual 7% return by collecting dividends on high yield dividend stocks that I hold. The second income stream comes from the selling of option premium and taking advantage of theta decay. I love trading strangles, Iron condors and diagonal spread for maximizing returns. Delta neutral strategies allows me to make money in both bull and bear markets and limits my risk. Both of these strategies are suitable for passive income and create a stable predictable safe passive monthly income.
Want to learn how to trade stocks and make more money? This channel is dedicated to increasing investment returns and building wealth by passively trading in the stock market. If youâre tired of poor performance then make sure you subscribe to Drawbridge Finance czcams.com/users/Drawbridgef... I produce weekly videos for the beginner trader and use simple explanations to learn how I buy and sell stocks for profit.
Letâs Get Rich Together
Levi Woods
Disclaimer: I am not a financial planner and am not offering investment advice. This is an opinion channel only and should not be taken as any form of financial advice. I receive a small commission from the purchase of any item from using the links listed above. There are financial risks involved in taking on any monetary transaction that I discuss in my videos.
#Options #StockMarket #PutRatioSpread
By far the best strategy for beginners with small capital and low RR. You mature and adjust the trade for better rewards.
love the spreadsheet! Thank you!
You really know options well. Thank you for this kind of content. Its extremely helpful.
Thanks!!
Thanks for great explanation. Im new to options and donât fully grasp the concepts of buying and selling puts or calls, but your video sure helps with your explanation
Thank you for sharing your expertise. It's greatly appreciated.
Good stuff...love butterflies, positive risk ratio the way to go!
Thanks for your time and walk thru!!
Thanks for watching!
Thanks again, Levi! I've really been enjoying these butterflies!
Thanks Matthew!!! See you in the chat room tomorrow.
Appreciate your input and advice, thanks... I have a lot to learn.
Passionately explained!
Thank you, I enjoy your content. It has helped me understand trading.
Glad to help
Thank you! I subscribed đ€
This period making a good profitable investment should be in every wise individuals list đŽđŽ
His technical analysis are very accurate
My weekly earnings from his trade strategies are mind blowingđ€đ€
My previous trade with him gave me a total profit of âŹ42,000 so am definitely going for a new trade this week.
Trading without an expert is like gambling with your money
Its so generous of Logan Allec to find out time to help investors on their investments, although he has a team of professionals. I'm so grateful,he turned my 0.3BTC to 2.1BTC.
Another good one Levi. Thanks!
Thanks Kevin!
Thank you Levi very much for these videos! I was wondering, can you make a video on options basics? I am just trying to wrap my head around some of the simple ideas of options
Absolutely!!
Outstanding Commentary!!!! Thank You!!!
Glad you enjoyed it
Great job explaining ! Thank you ! :-)
Thanks
Thank you for your excellent content!
Thanks for the great content!
Thanks!
Boss, thanks for the idea, however I think you should have specified the strike price of legs involved, like ATM, one strike OTM, two strike OTM to be clear.
Another great video. How do you determine what strike prices you'll use? Are you looking at certain deltas?
Usually selling between .16 and .30 delta.
Great video!
Glad you enjoyed it
You r an amazing. I would love to learn more of it from you.
Thanks Levi. uff, lots to learn! We have it difficult in Canada. I had to transfer my cash account to a Margin account on IBKRs because I was not allowed to use Butterflies, Spreads, etc. I hope I can trade SPX now...IBKRs is too complicated!
Yes, do not ignore the impact of high brokerage and other charges, especially in Indian market.
Thanks you explained well
Love it
Thank you for sharing.
My pleasure!
Thank you
Thank You like button smashed and notification on đ
Thanks!!
Thanks, what about Early Assignement Risk, when your Short Leg is deep ITM. Does this happen on SPY, QQQ , so Index Options?
For the q about assignment
That is good news for your long debit fly
You collect on the bottom leg and if itâs between the top, you probably get half of that leg
Great video...
Great video.
Thanks
thanks man subscribed
Thanks for the sub!
thank you for the vids - just learning these trades - any advice besides your content that helped you- only have $1450
Thank you!
You're welcome!
Good information đ
Thanks
Good job!
Thanks
Good Video and am interested in the process that you utilize to scan for with parameters for finding higher probability butterfly trades.
I use a watch list.
Quality content đ„ł
Thanks.
Good video, you should look into the website Option Strat, does all this tracking automatically
I appreciate your sharing. Still new at this....feel like a sponge for this kind of information, unfortunately, something rings me out by the next day. Hopefully my retention will get better lol. Thank you
Glad youâre enjoying. It took me many years feel like I knew what I was doing. Small bits of info everyday is the easiest education.
When to know if the sell call, will trigger on?
Brilliant, well explained. Of all the potential strategies, do you still remember the first one where you knew that finally you'd found at least one that worked consistently, and that now you had an edge at last?.
Iron condors
thank you
You're welcome
Hi Levi, glad I found this video albeit a little late. Iâll look for the 100k challenge. Sounds exciting. Also very excited to see another Canadian on here. I have wanted to do BWB but have been scared off by margin requirements in Canada. Im just not sure I can make a good living trading BWB which I sometimes find can be up to 5x my max loss. So Iâve focussed on simple calendars (but unfortunately have had a lot of trouble with calendars in 2022). So Iâve been dabbling with butterflies and would love to do BWB if I can make it work
I mean the margin can be up to 5x my max loss (since IRROC forces Canadian brokers to treat a BWB as a debit spread and a credit spread)
The margin requirements are harsh but I always leave lots of margin available because using all of my margin over leverages my account.
Nice and valuable
Thanks!
Thanks
Youâre welcome
Great đđđđ
Thanks!
Levi, good stuff, thanks for putting it out.
I get a bit confused about the terms when calculating trades, specifically credit and debit with a negative. If I'm selling an option but it's a negative did that mean I'm actually paying money to sell the option?
I know I'm not the only one confused by some of the terminology, maybe you could make a short video explaining those kinds of terms.
This can be very confusing. If itâs a single option then selling generates a credit. When trading multiple options in IBKR itâs best to use the order confirmation window to see if the is a green CR for credit or red DB for debit to confirm. The negative can be either way so it is a poor indication.
@@DrawbridgeFinance I have a Long Call Butterfly Spread that expires in about a week. I'm confused on something that I am hoping you can help with. Am I supposed to wait for expiration and hope it's in the money? Do I just get the amount it's worth if it does expire in the money or am I supposed to close the position at some point? I sold 2 calls and bought a call above and below the sold calls strike price.
@@MilltowneMikeit depends on the underlying. SPX is cash settled so can be held to expiration. What is the exact position and on what underlying?
Do you need to close your position by buying opposite trades? Because QQQ is such a pain to get rid of,the gap between ask and bid prices for it is huge.
Thanks! Can you tell me which spreadsheet you are using and provide the link to Etsy. Great stuff!
etsy.me/3hgHYHK
nice
Hi Levi, you're such a great mentor. My partner has a hard time selling his Call Butterfly Option in Charles Schwab Streetsmart Edge expiring in 12 more days. It doesn't get filled, no matter what positive Limit Credit he puts in. Can you make a video on Selling to Close a Butterfly Spread? Thanks!
Exiting butterflies for credit can usually not be done until expiration day when the stock is in the profit range. The nature of the trade is such that the stock has to be in the right place at the right time which is why they are low probability trades.
Interesting content, thank you. Do you close your SPX 0-DTE prior to the end of the day and let it expire worthless ? It may be risky as there is movem ent after the closing. Thank you
I typically close spreads and donât let them expire. Some underlyings (SPX) are cash secured so there is only movement risk after hours and all options settle automatically.
Very nice explanations - Spread sheet down work in excel?
My newer spreadsheets are all designed for Google sheets. Itâs free and the complex colour coding canât be done in excel.
Groovy shirt !!!
Thanks
Every beginner should start with butterfly and progress to BWB and adjust to debit/credit spreads...
Being Able to Ten x your investment by pinningthe strikes on expiration would be pretty incredible if you had the foresight to know where the underlying is going to land. For those of us who is Crystal balls are a little cloudy, What kind of profit target do you recommend for a butterfly trade?
I mostly trade broken wing butterflies because I can set them up to only incur loss to one side of the trade. That way I can hold them closer to expiration. Because they are such an advanced trade and have so many varied entry parameters there is no standard set of exit rules. I know that isnât super helpful. Generally I will play iron condors over butterflies as the range is wider and they are an easier strategy overall.
So as we saw in your tracking Iron Condor's have greater probability of profit (pop) but I assume also greater risk. If you are expecting the market to crash what should you do?
Tks
Thanks!
thanks
how do you choose the stock to trade? interactive customers is very bad but i like there plate form do you except emails lots of questions
Check out drawbridgefinance.ca for my email
How do you know what price to exit the trade at, or is that automatically populated for you when you go to close the option? For example, in the first butterfly you said you closed it at .20?
These trades are time based so they are held very close to expiration. If the stock is in the profit range and I think it will stay there I hold until the last few hours of the last day before expiration. If itâs outside the profit zone I close as soon as can once Iâve decided that the likelihood of moving back into the profitable zone is slim.
can the spreadsheets be used with Futures Options like on ES, NQ options?
My Rolling Options Record Keeper is designed to pull real time futures prices from the internet and calculates for the multipliers for the most common futures like: ES, GC , NQ, NG, SI etc.
Most of my spreadsheets can have the spot price manually entered so any underlying can be used. Please check with me on a per spreadsheet basis for further information.
Nice video, are your spreadsheets available for Excel?
Some of my older spreadsheets are still available in excel. I started developing for Google Sheets a couple of years ago because itâs free for everyone and the formatting options are far superior to excel.
@@DrawbridgeFinance makes sense. They look great. Iâm going to check out the site more and hopefully pick some up. Thanks!
Just as a matter of interest, how did you do with 1k to 100k challenge?
Hi great videos. I've looked at a butterfly spread and checked out the profile on my IB account. I'm a bit confused as the profile that shows the profit tent also shows those dots and those dots don't actually move into profit. Is it like that because you just have to be really quick to close out the position once its in the middle of the profit tent?
The dots show the projected value of the trade on a particular day. Default is the current date. Look to the top right of the window for the pull down to change the date to change the dotted line over time.
@@DrawbridgeFinance thanks for your reply. Yes I know, but what I cant understand is the dots are showing no profit for any of the days apart from the day of expiry. If you can only profit from being in the tent and only on the day of expiry then its highly unlikely that it will succeed
@@DrawbridgeFinance are the dots presented in a misleading formation as its such a small profit window? What I mean is, do they always look like that and have to be ignored slightly or am I missing something
If XYZ is trading at 110 with resistance at 120. Buying 1 call 110, selling 3 at 113 and buying 2 at 117. What would you call that? With swings daily, looking to cover short before bounce. Entered at zero cost.
Call Broken wing butterfly (1-3-2). I usually do it with puts but itâs the same principle. Weekly Returns of up to 100% using Broken Wing Put Condors 1-3-2
czcams.com/video/LuJQ2vlHHGc/video.html
How far out do you set up your trades? 0DTE,1DTE, 1 wk?
Butterflies are usually 0-10 DTE for entry depending on market activity.
Please, can you show me how to 'add' another contract to an open position in IBKR? and also how to close half of my contracts from an open position? please,
BWB are pretty great if set up correctly. Are you solely trading weeklies with that account?
I trade in a variety of accounts and various strategies from weekly to LEAPS that all get posted on Patreon. The #drawbridge 100k challenge is specifically limited loss, weekly strategies.
You should have a sense of direction to play BWB...
Just to add to my comment, those dots are only showing profit in the tent area on the day of expiry
Butterflies only profit right before expiration.
Excellent!
Sorry for all the questions. Are butterflys only profitable on expiry?
Yes.
I trade them 2.5 window pay 20 cents leave 30 cents
Check for fees, they do become better as they expire in terms of profit
How do u share trades
đ° Join the members only chat room: www.patreon.com/drawbridgefinance
Is there any risk and being assigned shares or is your maximum loss if you do it on the debit side just what you paid for the option and how would you close this out
There is assignment risk if the short options go in the money. To avoid this I close them prior to expiration. Butterflies are protected by long options so I also close those prior to expiration to minimize my losses.
Thank you for responding, Iâm trying to build a small account and this even though seems there is risk as long as you manage it properly you can grow an account. Being new I will take nickels and dimes until I get in the groove. Thanks again and please continue your content, you explain things great!
Iâve been assigned a butterfly usually itâs around a dividend
Do you think its worth it to do this on robinhood or webull since they dont have any commisions and all the leg commissions start adding up?
Itâs much better in no fee trading accounts for sure.
How did it go? The goal was to make $1000 into $100,000, very high goal, but not impossible in the options world. I'm not sure if you posted another video with how it turned out, cheers!
When you sell 2 at the money and you buy 1 of each out of the money when spread are equally apart of each other. Once the at the money crosses over in profit territory. Don't you have to be concern of getting assigned? Or if you make a play in directional butterfly and if it blows by your 2 sell options. What are the consequences when it does? Isn't it risky of potentially getting assigned? I haven't found any explanation on videos on youtube whatsoever. Am I missing something? All the talk is about making profits and no regards to being assigned!
There is assignment risk on short options but they typically donât get assigned until the extrinsic value of the option is next to zero. At the money options hold their extrinsic value very close to expiration. With this strategy thief is profit risk if the stock moves away from the short options. In a strong move either direction the easiest defence is to close early so that the trade can be closed for less than max loss. Therefore there are 3 out comes:
1. Stock moves so that all of the options are out of the money. Hold to expiration and let them expire.
2. Stock stays close to short strikes (with the shorts being in or out of the money) hold as close to expiration as possibly and exit at desired profit target. Many times my profit target will be 25% of max potential profits.
3. Stock moves so that all of the options are in the money. Close early to limit further losses. Butterflies (especially weekly) are very advanced trades. Learning about extrinsic value will help you understand the assignment risk on each leg.
@@DrawbridgeFinance Thank you Levi for this brief explanation. I greatly appreciate you for taking your time on this fuzzy strategy. Like you said, "Learning about extrinsic value will help you understand the assignment risk on each leg. Example: Imaginary Butterfly short play. XYZ stock at 436. So I buy the +1 long put with the strike @435, sell -2 @ 425 strike, and lastly buy +1 long put @415 strike. Then the strategy is going in my favor. Now let's say XYZ is trading between 425 and 415. Here's my confusion because the 425 is in the money which I could be technically assigned. So do I have to calculate the extrinsic value even before it hits that target of 425 to be on the safe side? Love your work. Hope to get there someday.
@@kerrytom4731 I look at the extrinsic value of almost every option that I am in on a daily basis which is often 200+ unique legs. There is no calculation required and I just run down the list looking only at the out of the money options.
The formula for option price is:
Option price = intrinsic value + extrinsic value.
This means that any option that is out of the money has only extrinsic value so the option price is equal to the extrinsic value ad intrinsic value is zero.
For in the money options I look at the opposite side of the chain to estimate the extrinsic value. In youâre example if the stock was between $215 and $225 then then 225puts would be in the money. I would just look at the value of the $225 call to get the extrinsic value of both the 225p and the 225c. If the 225 call was worth less than 0.10 then there is assignment risk of the 225 put. If the value of the 225 call is greater than 0.10 then there is little to know risk.
@@DrawbridgeFinance Thank you for your immediate reply. Now I will dive deeply into all the various form of butterfly strategies. Since I have a small account ( $3000.00 ) with Tastyworks. Trading options is my main source of playing in the market. Would love to initiate naked puts. Currently can't do much with my account size. Though I have for several weeks in succession play naked puts on NIO weekly that extends to 4-5 days out. Did well. But it was really getting a taste or rather getting my feet wet. Currently my positions are in vertical spreads with AAPL and DIA. It's holding up well. Will have to see how the overall market will shake out in next few days or weeks ahead. There's no guarantee. That's the reality of the market. I'll keep you posted on my journey from time to time. What you have provided the source of information is invaluable and means a lot to me. God bless!
If you got signed, that means you win, your goal is to hit that middle post in the butterfly. If you got there, you exercise your lower piece and if youâre between the strike of the top, you could close your top call and close your shares
Itâs not a disaster. Itâs happened to me.
I love that spreadsheet đ€©
Thanks!
How much DTE, before you enter such trades?
Can be anywhere from 0-100 DTE. I typically do 7 DTE
Real time
What is the name of the spreadsheet in this video?
This is the âRolling Options Record Keeperâ
You can download it 2 ways:
1. It is one of the Free downloads available to âOptions Tier Patronsâ www.patreon.com/drawbridgefinance
2. Purchase it individually on my website: drawbridgefinance.ca/collections/drawbridge-finance-spreadsheets/products/rolling-options-record-keeper
The drawback is you need precision with butterflies. With selling deep OTM puts on SPX 250 points away in 1 day is that your chance of success is high
Is true 10x?
How would you change it to a bearish strategy?
Place the spike in the profit chart where you think the stock will move to.
Use putS
The potential loss is 310, which could happen. Would you say that is an appropriate risk to take on for the portfolio size?
For this type of strategy less than 2% of total net worth to this type of trading. And that 2% divided even further. If I had a $100k account, I might dedicate up to $2k to weekly strategies over 5 different underlying stocks/etfs at $400/each. Using that logic a $310 max loss trade would be appropriate for a $77k account.
@@DrawbridgeFinance Oh gotcha. I kinda thought this was an example in the $1k challenge.
@@timiadetona it is part of the $1k challenge, the idea of the challenge is to risk $1k to make $100k. The $1k is at risk which is why I limit it to such a small portion of asset allocation.
@@DrawbridgeFinance If I understood correctly, please correct if not. The risk at play for each trade, at least in the beginning, is the entire $1k?
@@timiadetona the first week the goal is to risk $1000 spread over multiple trades. 4 x $250 risk or 5 x $200 risk as examples.
I donât understand why you do these as a credit spread instead of a small debit spread. Thatâs usually how I do butterflies but they are usually 0DTE.
Because I like to win if the stock doesnât move.
Itâs been a year, how did it go?
Itâs been a great year. My portfolio is out performing all the major indexes. How has your year been?
Wonder
Difficult to achieve or irresponsible?
nice clickbait - 10x is not 10% per week
Correct. Butterflies are the core strategy covered in this video and can earn up to multiples of 50x per trade. Invest $1 and potentially make $50. This is separate from my #Drawbridge100k challenge which was mentioned in the video where my goal is to make 11% weekly using butterflies and other limited loss options strategies.
ya amazing it then only would take you 6 months of winning trades and no losses to make up for the one loss of 100%. Risk reward sucks.
if anyone could 10x his money for just a few weeks, he would be dinning with Elon Musk in no time...
Interesting Canadian options channel I stumbled upon in the late hours today - I like it and your choice of Broker - IBKR - (Not that we have many good choices in Canada đ Eh.). So this will probably make more "platform sense" to me as I get hooked on. There - I hit the Subscribe & Like Button.
Awesome, thank you!
Thank you! Great info!
Would love to see you using Tasty Trade : )
As soon as itâs available in Canada :)
@@DrawbridgeFinance Thank you! Love the way you present the info.
webull is waaaay better than robinhood! college vs kindergarten!
Thank you