A Bearish Butterfly paid for with put Credit Spreads. As the results show, it works well in normal markets but got destroyed, like everything else, in the transition from normal to abnormal. Now that the transition is over, it would be interesting to see the results going forward. With volatility sky high butterflies are very cheap and I'm not sure the credit spreads are worth the risk they bring paying for the butterfly now.
Thanks, guys, for adding this here. It’s cool to see your own trade being discussed. It’s nothing revolutionary, and no one will ever be charged for it. It’s simply a discretionary take on JL’s Bull vs Bear, to fit my needs. Everyone who trades long enough knows that you have to trade according to your own personality, which means creating something new, or simply adapting a tried and true method (this).
March expiration was a bust. I sat out this specific trade in April as VIX was too elevated for being delta neutral. May, June, and July have been winners. Here is July right before exiting on Monday. Again, it’s nothing super special, but has paid for my car over the last year.
Good looking graph, Dave. Wonder if you entered this a single trade or legged in.
You are right about personality being very important factor. I learned that too.
I don't trade RUT and have no real feeling fir it. Just from my point of view downside risk is to big. I don't mean this concrete example (market conditions etc.)
Thanks, Marcas. It was legged in. Because it starts as 5 separate strikes, it must be legged in. Most brokers, if not all, only allow 4 legs max in one order. But it was all entered the same day. Also, I used a bit of TA here. Sold credit spreads when RUT was 1376 and bought the bfly two hours later when RUT was 1388. Here are the filled orders.
Normally there is no need for adjustment on this type of trade It's only when the market is crashing and at that point it may be better to just close it at a predetermined loss value based on an exit plan in this case it's the initial credit Ofcourse you may not be able to get out at that exact point when the market is crashing hard but you still get to keep most of the capital to put on another trade
On the upside you could do some adjustments to the butterfly and do a RH if you can afford the margin but normally I would just leave it alone and get whatever profit you have at the time for the next cycle