Finding spread trading opportunities

eurofxbutterfly.jpg
 
This index spread chart is not properly ratioed. You can find appropriate ratios on CME and I'll post the link later.
 
This is a butterfly spread that once traded in a narrow range before it blew out. Stephen Aikens has a more detailed explanation on his website. Other traders have spoken about the "embedded tail risk" in these spreads. Every trader has to manage his own risk but one should at least be cognizant of what those risks are.
If I were to venture a guess, I'd say that blowouts occur due to sizing up on ostensibly low risk spreads. In the end the black swan always gets its man?
 
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