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Has anyone used the "Bearish Butterfly" strategy with any degree of success?
- Thread starter darkshogun
- Start date
I am interested in learning about butterfly trades and adjustments in general and I came across Locke's Bearish butterfly strategy but I wasn't going to spend money on it until I find out more details about it
I was wondering myself if that trading strategy would work
Maybe if that was done last year or before that than it might work but I don't think it would work well in this year where the market keeps going higher and higher
I wasn't exactly sure how the strategy worked until I read through this thread
Based on that I was thinking rather than chasing the stock or index higher and higher why not place a butterfly in front of it
Not only is it cheaper when it's out of the money but as the days goes by and the underlying goes higher you make more and more money
If it looks like the market is going down than you can still add the bearish butterfly
So based on that I came up with a strategy that I think might work better at least for me
I constructed a simulated strategy on the TOS platform where I placed a butterfly on the SPX 50 points away from the current price of 1841 on both sides 50 points up on the call and 50 points down on the put and than connected the 2 butterfly with 1 iron condor contract that is 20 points wide and each butterfly is 5x and the wings are 10 points apart This is for the feb expiration
I call this the "Batman" strategy because it has 2 big ears at each end of the iron condor I get to keep $355 of the total $2000 at risk of the iron condor if it stays in the range by expiration which covers from 1771 to 1889 including the fly's
I like this strategy better than the iron condor by itself because in this upward market I always get burned on the upside and it's always close to expiration and this way
I can get out with an even better profit if at expiration is near the peak of the butterfly
I welcome any comments if you see any flaws in this strategy
I was wondering myself if that trading strategy would work
Maybe if that was done last year or before that than it might work but I don't think it would work well in this year where the market keeps going higher and higher
I wasn't exactly sure how the strategy worked until I read through this thread
Based on that I was thinking rather than chasing the stock or index higher and higher why not place a butterfly in front of it
Not only is it cheaper when it's out of the money but as the days goes by and the underlying goes higher you make more and more money
If it looks like the market is going down than you can still add the bearish butterfly
So based on that I came up with a strategy that I think might work better at least for me
I constructed a simulated strategy on the TOS platform where I placed a butterfly on the SPX 50 points away from the current price of 1841 on both sides 50 points up on the call and 50 points down on the put and than connected the 2 butterfly with 1 iron condor contract that is 20 points wide and each butterfly is 5x and the wings are 10 points apart This is for the feb expiration
I call this the "Batman" strategy because it has 2 big ears at each end of the iron condor I get to keep $355 of the total $2000 at risk of the iron condor if it stays in the range by expiration which covers from 1771 to 1889 including the fly's
I like this strategy better than the iron condor by itself because in this upward market I always get burned on the upside and it's always close to expiration and this way
I can get out with an even better profit if at expiration is near the peak of the butterfly
I welcome any comments if you see any flaws in this strategy
Quote from darkshogun:
I personally believe that trying to predict the direction of any market is the purview of insiders, amateurs or idiots.
Really? So the market hasn't actually trended higher over the last century?
Sometimes I get the feeling that the majority of "traders" out-think themselves.