Butterfly Widths


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I learnt "old school" butterfly widths based on training videos and subscriptions from about 2 years back. Even then I wondered why butterfly widths should be so - if a 30 point width (rhetorical number) was defined when Russell was 700, how can it still work when Russell is 1400 (now 1700)?

While a good strategy can still make it work via adjustments, I think we are ending up with lot more adjustments than before. For example, if a 1% move on a 700 point index was 7 points, the same 1% move on 1700 is 17 points so having a 40/50 fly implies such a move is covering 1/3 of the range on 1 side.

It will be better if we adjusted the trades a bit less because the butterfly span wide enough for most movements. I do not want to increase wing 2.5 times blindly because a) you can still use adjustments to make the trade work, b) the flies start costing quite a bit more and have bigger drawdowns and we should model them too, c) increasing wings 2.5 times is going to change the shape of T+0 line and potentially make it (more) unmanageable.

I wonder if someone else has done some work on this?

To share my side of story, I am experimenting with the following BWBs:
RUT - 60 downside, 50 upside
SPX - 75-60
NDX - 175-150 (I would like to maintain a 4:5 or 5:6 ratio but I do not like to use the 10 strikes, only the 25s so that's my current and 1st experiment on this).
DIA - 7-6

I am still not satisfied with the changes I have done and hopefully will have a better understanding of this in a couple of months.

For those curious, I (try to) trade NDX at half the size of SPX and RUT (because of massive moves it can have), and I trade DIA at half the size of NDX (because of commissions). But I would also like to know if people have been able to trade NDX flies successfully. BTW most of my flies are 45 days out.


I know what you mean
I asked a similar question at CD (can't seem to find it now) but basically I got a suggestion saying that it should not make any difference but bottom line is that I still think there is some difference although I am not sure how much and what can be done about it

I think the bigger question is where to place the shorts ?
After that you can adjust the wings to get the right greeks
Placing the shorts at 30 delta when SPX was around 1800 may have been ok when SPX wasn't moving that much
Placing it now at 30 delta with SPX near 2800 I can't say I would be comfortable with that

I was thinking it may be easier to switch from SPX to RUT to keep it in the same trading range as far as price is concerned but it may move more erratically since it is composed of small stocks

I thought about using the NDX but the bid/ask prices seem too wide so I am not sure if I am going to get filled and how much do I have to give up to get filled

The DIA seems to be too small That's like trying to do BWB on the SPY


New member
i think there is definitely a difference in the # adjustments. If your trade (and note that I did not qualify what the trade was) has a) things happen automatically with time, and b) adjustments, then you are weighing one things vs other with fixed width whether at 1800 or 2800. At 1800 you are leaning more towards time taking care of things, and at 2800 you are "leaning" towards adjustments. I intend to control the lean. I do not want to do percentage calculations based on price every time I place the trade and there should be some intuitive answer.

I came out with another number yesterday when thinking through this and I think I am going to think through this / model this. Unfortunately (or fortunately) I do not backtest but I can draw and visualize the T+0 so will see how it looks on T+0 for a few cycles. Anyways my finalized numbers (based on some kind of symmetry which I prefer). The numbers sound way too big I know and I might pare them down but for me they are something that I could adjust from memory (move X right, shift fly down Y) rather than having to do every single thing by calculation.
RUT : 60/75
SPX : 80/100
NDX: 200/250
DIA : 8/10

I do condors on NDX and they perform better because NDX gives you more money for the same delta and for same risk. Flies are going to be harder to manage but lets see.
I am picking DIA just for diversification and learning. All of these symbols have different charts and it helps to diversify. Having DIA at 1/4 the size of RUT/SPX (I may lower the size) allows me to get into more live situations and gain the experience faster. I do not think I want to add another symbol but I have always tracked the 4 indices and this also allows me to cover all 4.


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And for anyone reading and laughing at 80/100 wide fly, hey its a thought ... it either works or it does not.


I found my post at CD after some more searching
Basically it was just a comment on on a post that provided this link

It was just an interesting video about the crash of 1987 and how they were commenting on the record drop of 100 point or so in one day on the Dow which was a record back than with the DOW at around 2300 and now 30 years later and 10 times the price
that same drop is now almost normal trading these days

This is the reply I got
"It’s not the size of the NDX that makes it hard to trade but the volatility compared to SPX "

Which is true but I was just thinking that if we are going at this rate in a few years we will probably trading the same size as the NDX and it will probably have the same volatility so that's why I was wondering if anyone is trading the NDX now
I think it might be a good idea to start learning how to trade a high volatility index like NDX and perhaps learn a few things that could be applied to SPX

Do you have any problems getting filled on the condors in NDX ?
Do you get filled in one trade or do you break it up into spreads ?
it looks like they have good prices I am just not sure if I will get actually filled at those prices and more importantly once I get filled and the market comes down I am guessing the bid/ask will be even wider making it even more difficult to get out unless you overpay

The only problem I see with going wider with butterflies is that very few brokers outside of TDA and maybe a few others can apply the margin properly
So for an 80/100 in spx they would apply 10k in margin so that limits the amount of lots and reserve for adjustments


New member
I am traveling so could not model it better but see 4 examples of flies
ATM 40/50
ATM 80/100
Bearish 40/50
Bearish 80/100 (calling it bearish just for saving time)

Yes margin requirements are quite different, pricing is quite different and the pricing change when moving 20/40 points down is also quite different. I fully expected to cut down number of contracts with bigger spreads but this may be bigger than what I expected. Still it gives phenomenal value for money with a 40 pt down move if you see the price change from bearish to ATM. Also I took August end expiry the results will vary for other expiries.

Maybe eventually 80/100 is too expensive for its benefit but 60/75 or 60/80 or 60/70 may work out better. Would not know more without more research.

Yes if you can trade NDX others should be simpler but IMO even there there are 2 components : tent width plus risk AND adjustments and I think we need to look at both.

The only factor I am looking at (for the purpose of this discussion) is reducing number of adjustments per trade by having a bigger wing.

EDIT: Deleted the screenshots. Although I mentioned having a PM, I did not realize I was posting my account balances and in hindsight I did not like posting it.


I would say the first and the last one looks like a good one to start with because of the flat t+0 line but with big swing I would expect some adjustments are in order
The second one seems to have more risk on both sides as the t+0 line is more curved and may have to adjust sooner even though it's a wider width
The third one is ok if you are more directional and are expecting a pull back but if it goes the other way you have to adjust quick

I have moved away from the regular BWB trades because I don't like and sometimes I don't have time to adjust the trades after I put them on I am trying to make quick small profits something like 2% per week on margin would be ideal and sometimes I get it but most of the time it's more like 10 days to 2-3 weeks depending on which way the market goes but at least I don't have to make any adjustments
If I were to do a butterfly trade in Aug 31 I would do something like 2800/2700/2600 1/4/3 for 40 cents it does need a lot of margin though but it has a lot of room to the downside The short is close to the most recent low of 2697 and the breakeven is even lower than that at around 2666 If I need to make any adjustments I can easily do it at EOD

I tried to simplify my trades even more by doing just put verticals OTM and it worked very well so far but now that it's close to the record high I may have to get back into BWB trades to get more protection on the downside or give NDX a try

Just curious what software are you using to generate those trades ?
Is that from your back-testing software or something else ?


New member
My primary trade is spreads, the butterflies are still experimental at 2 lots each for SPX/RUT.
The above numbers were pretty arbitrary : I was trying to see how an ATM fly will compare with below the market fly, and then of course I wanted to check the different widths. The numbers were generated over my phone.
I do not use back testing software - have never used it. When looking at T+0, I use thinkorswim with default settings.


Have you been doing spreads a long time ?
I just started doing it recently from March until now and I am doing very well The best and most profitable year for me so far
I did only SPX while the vol was high Now that the vol is lower I have to get closer to ATM and I don't feel comfortable doing that so I am looking at other indexes that have better opportunities or maybe do other strategies like condors or butterflies

I started with butterflies but I did not like the long time you have to wait until it starts to make profit Sure you can have a big winner if it finishes inside the tent and I had that once which was nice but you can't count on that so most of the time I just get smaller profits every other month With spreads I can have a profit in a couple of weeks so I can and I try to do 2 trades a month and so far it has been all winners Now I have to be more careful and try not to give it all back to the market


New member
I have been doing spreads for about 2 years and trade all 3 major/tradable indicates: NDX/RUT/SPX.
I had a big drawdown in February : MASSIVE. As of now still in recovery mode and until I handle the next major crash, I would not be satisfied with my learnings and the changes I have made to my trading model. March to NOW has been a good time but it can all get wiped with a single crash.
My biggest learning has been in the area of adjustments where I play off long term spreads (30-60 days) against short term spreads (10-20 days) to get into some kind of delta neutral position and when market moves, I try hard to the other side and so far it has worked since March. I was doing the same earlier, but it was a very risk position sizing so I got wiped (not literally) in February but that learning helped.

I think I understand flies but there are so many variations and I do not want to use analyze graph during work day so it becomes a bit difficult to manage the trade. What I failed to do earlier, and I think I would be able to do now much much better is to carry forward any losses from flies to my spreads trade - ** touchwood ** - I am quite confident of salvaging losses there over time by delta management + rolling so if the price comes into the tent, well it does. If it does not come into the tent, I will take my loss, but open an equivalent position in spread and over time recover those losses.

Why not just trade only spreads? I still do not feel confident of salvaging 100% of trades so this is a backup plan and as part of this if I can start doing flies better, maybe there will be learnings from there that I can carry into spreads.


Sorry to hear about your big loss

I was just wondering if you could have salvaged most if not all the losses by rolling the spread out or down
Curious to know how far away from the market was the short strike placed

I try to place mine about 1.25 STD away but even so there were a few times that the market came down and my p/l was down a lot but I stayed in it and recovered
I know it can be a scary ride but sometimes you have to stay with it
There is also the option to roll out if it doesn't come back


New member
No need to be sorry. This is life and when we put our hard earned money at stake, we need to do our own due diligence or pay the market tuition fees.

There were multiple factors going on at that point of time and I would say it was a unique but unsalvagable position.
1. I had a level of positions that was excessive (or just ok).
2. In January I pulled out 25% money to pay taxes but did not adjust positions for reduction in funds.
3. End of January, NDX weekly moved from AM settled to PM settled but my brokerage had issues implementing this change. So there were times (over the period of a week), it would not show me weekly options, or refuse to roll or something else. I was with them on phone 2-3 times an eventually it started working correctly, but I lost opportunities to adjust. I was not even aware of this: https://www.nasdaqtrader.com/MicroNews.aspx?id=2018-04
4. My broker changed margin requirements (from what I read somewhere on twitter) and they would flash me margin call but when I looked at the account + I called them twice they said everything looks ok but "it is high risk, and think about what do you think will happen if the market crashed now". I checked and although I would have lost money there would not have been a situation where I would have gone to ZERO or even below the PM levels.
5. This made me quite unsettled anyways and when it was time to adjust, I was sort of 3 days late (not just NDX but everywhere) and a) price for rolling was excessive, and b) market moved heavily against me and I took a loss and just cleaned out [Edit: closed positioned entirely] my 2 accounts - no positions at all, just cash.

I took a month to restart trading, meanwhile thinking through what all went on and how I would play it differently. I came out with some set of rules that I would not breach (position sizing being one, but also some more) and then bit by bit resumed trading. So far so good. I have not yet recovered all my losses, but given a) smaller position sizes, and b) slightly more risk averse, I think I am making progress.

I usually start my trades at 16-20 delta (do not look at SD) and I am now starting trades only when the market has moved to an extreme on one side (which improves the odds of its reversing). So it is not open puts on a down day, but open puts when market has actually had a 5% move ... well that does not happen so I write call (spreads) when the market has moved up significantly and then I defend them fairly aggressively.


Thanks for sharing
That sounds more complicated than I imagined
I did not realize that you were using PM margin
I am using REG T margin which may be more expensive but it keeps me from risking too much
I saw the NDXP advertising in the think money magazine but I did not think it would cause any problems
TOS doesn't seem to have the separation in symbols When I type NDX I get both the monthly and the weekly expiration which is good in case you want to trade calendars or diagonals otherwise you would have to stick with one symbol or the other
I know Tradestation is having these kind of issues with SPX that's one of the reasons why I closed my account with them

One thing I noticed when I tried to make a simulated trade the other day in NDX is that on the 7 Sep expiration the 7100 put is the lowest strike that is available for trading so I would have to skip that expiration unless they will add more strikes as it gets closer but by that time it may be too close for me to trade that expiration
I like the SPX because it has a lot more weekly expiration's so if I don't get enough credit I could go out a few days without risking that much more

I usually start at 10 delta than I look at the analyze tab and see where it lands in relation to the 1.25 SD that I set
It usually lends beyond that and I could get a little closer but definitely stay out of the gray shaded area on the analyze tab
I try to get 4% on margin but I usually take it off when I get 2% in a little over one week depending on which way the market goes


New member
The NDX/P issues were resolved long time back, you will not see them now. I believe the broker messed up bad when the product was launched. It has been working well now. Lack of specific strikes is an issue but it will make me go to Sep monthly rather than Sep 7 expiration. I can work with that.

10 delta is way too far for me. I don’t think I make 2% a week, and my position is closer (delta is higher), but that's likely because I am looking at returns on the account rather than returns on the margin/trade and as of now all my spread positions are capped at (approx not hard) 10% of my account size so there's only so much you can make with such setup (still enough for my expectations).


I just closed my first trade in NDX
I made 3.6% on margin in 4 days in one account but of course the market cooperated with me as AAPL and all the other tech stocks made the index recover quickly from the recent selloff Unfortunately as I suspected getting in and out of the NDX is not easy You basically have to enter your price and let the market roll over you meaning the market has to be coming down and have a loss as soon as you enter the trade

With $2 wide bid/ask prices you are not going to get filled at the mid as the market is steady or going up
Getting out is just as tough You can be 500 points OTM and you can't get filled at 0.20 cents when the mid is showing 12.5 cents
SPX has much tighter bid/ask spread so you can get in and out easier

So this was just a one off trade given the opportunity in NDX but who knows maybe after the earnings NDX comes down again for a chance at another trade but if SPX comes down as well I will probably go with SPX first


New member
Yes NDX is tougher in all ways, but NDX is still pretty liquid compared to everything else (except SPX and RUT) and if you can master it, or even if you don't you take away lessons that you can apply to others. Width was one such learning - I mean we can live with adjustments, but should we have to and if we can change the width every so slightly to reduce the adjustments by half, why would not we? Fills is another issue and I have not yet thought through it as much, my trades on the condor side on NDX were working ok so never had this worry.

But when I trade SPX or RUT, my "least count" is 10 - that is spreads are at least 10 points wide and if I move something, it is at least 10 points. For NDX, my least count is 25 and I use only those strikes that divide by 25. That being the case, if my slippage in SPX was 5 cents, I would happily pay 15 cents slippage in NDX, no? 12.5 cents be the simple math but NDX being more slippery I feel it deserves just a bit more. And if you can close it at 20 cents slippage, it is still not a loss. You just need to plan for it.


New member
BTW I trade way close to the money than the deltas you mention so maybe these slippages do not matter to me but they do to you. My default is 16-20 delta but I am happy to defend delta 40-60 (yes 60 or more) on the upside (I am a bit more fearful on the downside) as long as I can co-relate my position against the charts.


I guess that is a matter of individual preference
I like to trade as far as possible from the money while still getting a decent amount of profit without any adjustments
I like small but consistent profits that add up quickly while others prefer longer term with higher profits per trade but when you factor in all the adjustments and divide the p/l into weekly p/l it comes out to almost the same amount

I watched Bruno's Rhino presentation part 1
He mentioned that he traded SPX with 75/100 recently and also traded it with 60/80 and 50/75 for the rut he is still doing 40/50
and he said he has not traded it with NDX That is not to say that it could not be done just that he has not traded it


New member
It is definitely a matter of trading style. After all, a Butterfly is nothing but a PCS + PDS.
My proposed sizes for the Rhino are attached to the strategy and its management.
Flies in a similar wing size ratio will behave roughly the same (a bit more skew on larger wings).
If you modify that ratio you'll have more or less downside protection at a cost you're comfortable with.
I also agree that far OTM far dated combos are easier to trade, for however a lower profit on average.
Every choice implies a trade-off of some sort in options trading.