subject: Butterfly Spread - Will You Marry Me? [print this page] The butterfly spread is one of the most powerful and reliable option trading strategies around.
There really is not much you have to do in order to realize a profit when trading this strategy in calmer more docile months. They are what I like to refer to as a 'lazy' trade - one that quite quickly kicks off a profit - as long as the underlying - and the stock market in general - behaves itself and stays contained nicely in a range.
But, I guess the same thing could be said for our other bread and butter monthly income strategies as well - like the iron condor, the diagonal, the calendar and the double calendar. At least during those beautifully lazy, calm, quiet trading months.
But what is different about the butterfly spread - what makes this trade stand out from those others - is how it handles during the difficult months.
Ever since the crash in late 2008, theta positive, monthly income option trading has been a challenging endeavor to say the least. Sure, all those afore mentioned trading strategies can and have worked - however through many of the months there's been a lot more work, adjustments, annoyance, and stress involved then in past more peaceful trading times.
However - the butterfly spread - has, and continues to work incredibly well - even with volatility levels going off the map. I've traded calendars, and condors, and diagonals - and a lot of other option strategies through this more wild time in the market - and I have to say the strategy that stands out head and shoulder above the others is the butterfly spread. It's the most robust - the most consistent - the easiest to manage - it absorbs big moves the best. It's the trade the has given me the least amount of problems - and the most amount of profits.
Now don't get me wrong - I'm not throwing those other option strategies under the bus...
I just prefer - in a big way - the butterfly spread.
Oh mamma.
Here - I get all teary eyed and emotional just thinking about it.
Hold on one moment please. Allow me to get my composure here...
Basically it comes down to this -
If a low down dirty thug walked into my trading room one day and forced me at gunpoint to pick just ONE trading strategy I was allowed to trade for the rest of my life - I'd have to choose the butterfly spread.
