I wanted to share a trade I have been placing all year with great success. Thought it might be useful for others to learn from. Also would love feedback on how to make it better.
This is a trade I placed today, 8/24/2024, but I place this trade just about every day using the same rules. So far in 2024 this trade has had a 77% win rate, and has returned over 200% based on a max drawdown of $4000 (figured from backtesting, and now 8 months of data).
Here are the rules of the trade.
1) Open a SPX Iron Butterfly at 10am EST: Centered around the current SPX price. Wings 20 wide. Today we opened this trade for a credit of $13.50.
2) Once original trade is filled submit a closing debit order for the trade. If the wings are never touched by the SPX price this closing order will likely fill.
3) If the breakeven points on either side are touched we cancel the closing iron butterfly trade. Today the trade canceled at 10:49am EST.
4) We then close whatever side was touched. Converting this trade to a credit spread. Today at 10:49am EST the put side was touched. We close the put side at the market price. This converts this Iron Butterfly Trade to a Call Credit Spread. It also increases max loss. We closed the put side for a debit of $11.10. We brought in $13.50 when we opened this trade. We just spent $11.10 closing out the put side. So we have $2.40 left in possible profit.
5) We then place a closing trade for the other side. Today that side was the call side. We place an order of $0.15. We do not want to risk the market turning at the end of the day.
That is more or less how the trade works. Place this trade everyday. Most days it breaks one way or another. Sometimes it stays within the wings. Typically this trade bring in around $250 per lot. In high volatility it can bring in around $500 per lot.
Here is what the trade today looked like on the chart. The blue lines are the wings of the trade. (times on the chart are in PST)
I explain the trade a bit more here: https://youtu.be/iSnYQ9Xf6AU
I think this trade is very useful because it does not matter what the market does. It adjusts with whatever way the market breaks. It gives some padding if the market is moving up and down. It only fails when we have wild swings up and down in the market.
It trades SPX so we do not have assignment issues. We also have favorable tax treatment.
Would love feedback, or questions if this is helpful to anyone.
Example Zero DTE Options SPX Iron Butterfly Trade
byu/spicermatthews inoptions
Posted by spicermatthews
1 Comment
Open iron butterfly or condor?