BROKEN WING BUTTERFLY
When first learning to trade, many people become intrigued by the risk/reward ratio of a traditional butterfly. Paying $0.10 to $0.20 for a butterfly that can make $5 looks too good to be real. However, after doing a few butterfly trades, people learn really quickly that it is difficult to pick a closing price for a stock or index.
Do you want the potential returns of the butterfly, but yearn for a way to enter into them for zero cost? Here is the solution—the Broken Wing Butterfly (BWB).
This 2.5-hour class video (with its companion spreadsheet) demonstrates the BWB concepts. The evolution of the broken wing butterfly (BWB) from the naked option, to the spread, to the butterfly, and to the BWB is also explained, comparing the risks and rewards of each. You will learn where and when butterflies are worth the most and the limitations of traditional butterflies.
Defining the BWB—The BWB construction is explained including the strike placement, duration, margin, and volatility considerations. The traditional butterfly and BWB are compared. The basic rules for BWBs are introduced.
Learn Stratagem’s method of using the option chain to predict the price of the BWB (and other trades) after an immediate price move. Demonstrations using the option chain and BWB pricing to determine the strike locations, the loss area, the maximum profit area, and where you get out are included. Ideas on how to scale out of BWBs in steps are presented.
Should you decide to purchase the Broken Wing Butterfly book (available in 2018), your purchase price for this introductory class will be counted as a discount towards the cost of the BWB textbook.