For butterfly traders like myself, there are scenarios that occur where a trade can appreciate very quickly. This can happen for several reasons. One of the very common causes of this phenomenon is when the trade is initiated in a high volatility environment and then the volatility is removed from the market rapidly. In other cases the market simply channels for the … Read More
What is your “bread and butter” options trade?
Yesterday we held our second Options Tribe webinar on the subject of an SPX butterfly trade that I was involved in developing. This trade has become my “bread and butter” trade –the approach that I am comfortable trading under almost all market conditions and which provides a stable pattern of returns. Almost every great options trader that I know has his … Read More
Expiration Week Pinning Trades
Here’s an e-mail I received from a good friend of mine and former mentoring student Options Tribe Member Craig. Craig is a fine option s trader and specializes in “expiration week trades”. These are highly specialized trades that Craig makes almost every month during options expiration week. Each expiration week , I ask Craig what he’s up to this month. … Read More
Traders Ask: What Do I Do About An Obnoxious Bid Ask Spread on a Butterfly Trade?
An Options Tribe Member asks: Given that we’re about 55 days out from the July monthly options expiration, I was playing with a July 770-820-870 put butterfly on the RUT (when it was trading around 840). Usually the bid/ask spread for ATM and OTM puts on the RUT is narrow enough, but the spread on the 870 put ($51.80 by … Read More
A Great Note I Received From One of My Mentoring Students
Seth – When I was in the military, I was assigned as the unit trainer (started with 70 soldiers). To give a little more detail, I was a lieutenant in a patriot missile battery. When we would train, it would be three different platoons in one confined area, all training toward one objective (getting our site, missile launchers, and engagement control … Read More
Traders Ask: Is it better to neutralize a double butterfly or simply close it?
Martin asks: I have a question about one of your first webinars involving the February butterfly. At the end of the trade it appears that instead of closing the trade completely you just neutralized it. What was the reason that you handled it that way ? What is the advantage of neutralizing the trade instead of closing it?: Martin is … Read More
Decoding Market Volatility: Navigating the Heck Out of Options Trading with Dan Harvey
When I first started trading options a number of years ago, I became very friendly with a great options trader, and an even greater human being by the name of Dan Harvey. Dan, a retired medical doctor, is one of the finest options traders I have ever met. He is very analytical, very calm and a very flexible thinker. … Read More
“Milking” an Options Trade
Every properly designed income options strategy should have both a target profit and a maximum loss. Both are extremely important in order to maintain a realistic annual return target for a particular strategy. The skilled income trader is both disciplined at exiting when a trade has hit the maximum loss threshold and skilled at what we alluded to in my last … Read More