Chris, any time I need to learn something about options, I come to your videos first. They have the most detailed information that helps me understand better. Thank you for having these available.
Chris, Thank you for this video. As one of the shorts gets ITM, it would be helpful to see how you add some defensive mechanism to this strategy. Closing the different legs of the strategy is key to risk mitigation. Thank you, A
The image is showing a Long Iron Butterfly, while the video discusses a Short Iron Butterfly... Short Iron Butterfly is a multi-directional play, Long Iron Butterfly is a Stationary play. This is a mistake ?
Hello Chris! I hope you receive this message in good health. My question: Do you provide mentoring or Can you just make step-by-step video on the trading platform
I cannot find good content like this on reverse iron options. What would this strategy look like in reverse? Any video you have already done on this? Reverse Short Iron Butterfly. Thank you.
Okay this is probably a really silly question but one thing confuses me about selling spreads. Does my max loss include my credit or not? Lets say for example i get a 50$ credit and my max loss is 100$. Am i losing 50 or 150(100 original equity+credit)
your loss does not include your credit, your credit will be given to you full as soon as your sold options expire worthless, having said that if you close your options before the expiration date they could be close for a small profit or small loss depending on the stock price move. but if you let it expire then you will get full credit regardless of your loss
Great video! What is a good stop loss lmt for the iron butterfly? Someone in a forum suggested to set the stop loss at the breakeven prices. Thoughts on this? Thanks!
Hi Chris, are there any differences between a short call butterfly and short put butterfly strategy since both profits from out-of-range strike prices?
They're technically the same except there are differences based on the scenarios you can find yourself in. For instance if you had a short call fly and the stock price is way above the short call's, the shorts would be at risk of assignment if they had little extrinsic, or if the stock had an upcoming dividend. If the stock price was at that same price but you had a short PUT fly in that same scenario, there would be no assignment risk because the short puts would be OTM. The main difference is the assignment potential since if the short calls are ITM, the short puts at the same strike would be OTM, and vice versa.
I don't believe so. However, depending on what happens at expiration you might have to sell 100 shares (see 13:40 in the video). And if you didn't already own it then you could end up forking over a large amount of money to buy 100 shares of the underlying. That could also be avoided by closing the position or exercising a counteracting position, also if your account is allowed margin trading or not will effect it. At least to my understanding, do your own research as well.
Thanks for sharing all your knowledge and experience through videos. I am a humble student of your channel. However, I run into two fundamental level confusions in almost all your videos. You use phrases short option and long option very frequently. It would really help beginners such as myself if you elaborate them like buy put or buy call or sell put or sell call. Also minize using words short and long . Instead elaborate buy or sell put or call at or above or below certain strike price. Another confusion I have is you refer to selling calls or puts as short options. Is that true? Pardon my ignorance. I thought selling a call is shorting and selling a put is going long. I may be totally wrong. Hope to see you elaborate and clearly state buy vs sell and call vs put in your future videos. Any way it's easy to criticize the work of others. I am in no position to criticize. Just a humble request. Cheers...keep your awesome videos coming 😃
Lol when you think you know trading then here this man talking bout straddling the wings of how wide the spread is under the delta ray gamma theory with the price falling before my net short options expiring worthless for maximum profit potential
I am very confused about something: if I collect a credit of $100 and my max loss is $50, it means I have no risk? Does it mean I am guaranteed to make money? (I pay the $50 using the credit and I keep the remaining as profit). What am I missing?
No, it means you collect $100 initially, but the position could increase to a total value of $150, meaning you'd need to buy it back for $150 (paying out $150 when you initially received $100) at expiration. The credit you collect is NOT profit. It's not a profit unless the position value falls below the initial credit and you repurchase it for less (collect $100 for the position initially, then it falls to $70, and buy it back for a $30 profit).
@@MarianBoricean correct you don’t have to close it before expiration. If it is fully ITM at expiration, the position would be worth the max value and you’d have the max loss. You could allow it to expire and you’d be left with no position. You’d still realize the max loss. The only way the iron fly would expire “worthless” is if the stock price pinned the short strike at expiration. Then you’d have the max profit though!
@@projectfinance Yes, that is correct I will experience the max loss. But the "max loss" is less than what I received when I sold the spread. I don't care if I have the max loss if that amount is less than what I received. In your video at minute 14:26, your screenshot shows that in that particular case, the credit received was $347, then right under, you say that "Max Loss Potential = $153". So... what if I experience the max loss? I pay gladly that amount $153 and be left with the remaining from my credit. Where is my flaw in thinking?
@@MarianBoricean You are misinterpreting the credit received. In the specific example, if you sell the iron fly and collect $347, you sell the position when it is worth $347. If you experience the max loss of $153, that's because the position increased to a value of $500. The max loss comes from buying back the position at a higher price than you sold it. The max loss doesn't mean you are paying the max loss to close the position. If you sell the iron fly for $347 and it increases to $500 (its max potential value in this case), you don't have a profit. You have a loss of $153. If you want to avoid holding the position through expiration, you need to buy back the iron fly for $500. If you do hold the position through expiration, you still end up with the max loss because the exercise/assignments will offset in a way that leaves you paying $500. If the stock price is below $70, you get assigned on the 75 short put and auto exercise the 70 long put. The result is you buy 100 shares at $75 and sell the 100 shares at $70 (a $500 loss). If the stock price is above $80, you get assigned on the 75 short call and auto exercise the 80 long call. The result is you short 100 shares at $75 and buy them back at $80 (a $500 loss). So in both of the above cases, you would have a -$500 net outflow from your account, but since you collected $347 for the position initially, your loss is $153. The simplest way to understand all of this is if you short the position for $347 and it goes to $500, you lose $153 whether or not you buy back the position before expiration or allow the position to expire ITM.
Hi Jerry! Thank you! Yes, a short iron fly is a good earnings strategy, in my opinion. That's if you believe the stock price will remain "inside the expected move" or not move as much as the options imply. For instance, on a $100 stock, if the 100 straddle is trading for $7.20 in the weekly expiration cycle for earnings, the implied/expected move is about $7.20, or 7.2% in either direction. If you think the stock will remain in that range, selling a straddle would be a trade that would profit if you're correct. However, you'd lose a lot of money if you were wrong, which is why the iron fly is a great strategy to protect yourself if the stock makes a huge move. Of course, by purchasing the OTM options to limit your risk, you'll collect less option premium, which means the stock will need to stay in a tighter range for you to profit (when compared to when selling a straddle by itself and collecting more premium). -Chris
Thanks for watching! Haha I just Shazam'd it for you. It's called "Accidents Will Happen" ruclips.net/video/O3VkhzWa8fg/видео.html It was some Copyright-free music I found on RUclips, so it may not be on the big streaming platforms.
Chris, any time I need to learn something about options, I come to your videos first. They have the most detailed information that helps me understand better. Thank you for having these available.
Thank you, Jeffery! I really appreciate the support!
You are absolutely one of the best teachers out there. I love your explanations.
man u r the best for real. thanks for everything u provide on ur channel and keep up the good work
Thanks for watching. Many more videos to come!
@projectfinance When you are talking about probability of profit....can you define what is considered a "wide" vs "narrow" ? Thank you
Chris, Thank you for this video. As one of the shorts gets ITM, it would be helpful to see how you add some defensive mechanism to this strategy. Closing the different legs of the strategy is key to risk mitigation. Thank you, A
is ironfly the best strategy with rangebound market? not a good one in today's market?
The image is showing a Long Iron Butterfly, while the video discusses a Short Iron Butterfly... Short Iron Butterfly is a multi-directional play, Long Iron Butterfly is a Stationary play. This is a mistake ?
The best video I've watched, thank you very much
Hello Chris!
I hope you receive this message in good health.
My question: Do you provide mentoring or
Can you just make step-by-step video on the trading platform
I cannot find good content like this on reverse iron options. What would this strategy look like in reverse? Any video you have already done on this? Reverse Short Iron Butterfly. Thank you.
What if you took profits before expiration or adjusted the challenged side?
Dude thank you so much for this. The explanation was crystal clear!! Cheers
Okay this is probably a really silly question but one thing confuses me about selling spreads. Does my max loss include my credit or not? Lets say for example i get a 50$ credit and my max loss is 100$. Am i losing 50 or 150(100 original equity+credit)
your loss does not include your credit, your credit will be given to you full as soon as your sold options expire worthless, having said that if you close your options before the expiration date they could be close for a small profit or small loss depending on the stock price move. but if you let it expire then you will get full credit regardless of your loss
Great video! What is a good stop loss lmt for the iron butterfly? Someone in a forum suggested to set the stop loss at the breakeven prices. Thoughts on this? Thanks!
Thank You Very Much
How about doing one on how to combine a butterfly and condor?
Hi Chris, are there any differences between a short call butterfly and short put butterfly strategy since both profits from out-of-range strike prices?
They're technically the same except there are differences based on the scenarios you can find yourself in.
For instance if you had a short call fly and the stock price is way above the short call's, the shorts would be at risk of assignment if they had little extrinsic, or if the stock had an upcoming dividend.
If the stock price was at that same price but you had a short PUT fly in that same scenario, there would be no assignment risk because the short puts would be OTM.
The main difference is the assignment potential since if the short calls are ITM, the short puts at the same strike would be OTM, and vice versa.
Good video, and explanation. Thank you.
Jacob,
Thank you for the comment! I'm glad you're liking the videos.
-Chris
Do you have to own the stock for you to get into an iron butterfly?
I don't believe so. However, depending on what happens at expiration you might have to sell 100 shares (see 13:40 in the video). And if you didn't already own it then you could end up forking over a large amount of money to buy 100 shares of the underlying. That could also be avoided by closing the position or exercising a counteracting position, also if your account is allowed margin trading or not will effect it. At least to my understanding, do your own research as well.
Thanks for sharing all your knowledge and experience through videos. I am a humble student of your channel. However, I run into two fundamental level confusions in almost all your videos. You use phrases short option and long option very frequently. It would really help beginners such as myself if you elaborate them like buy put or buy call or sell put or sell call. Also minize using words short and long . Instead elaborate buy or sell put or call at or above or below certain strike price. Another confusion I have is you refer to selling calls or puts as short options. Is that true? Pardon my ignorance. I thought selling a call is shorting and selling a put is going long. I may be totally wrong. Hope to see you elaborate and clearly state buy vs sell and call vs put in your future videos. Any way it's easy to criticize the work of others. I am in no position to criticize. Just a humble request. Cheers...keep your awesome videos coming 😃
Lol when you think you know trading then here this man talking bout straddling the wings of how wide the spread is under the delta ray gamma theory with the price falling before my net short options expiring worthless for maximum profit potential
😂😂
💀 💀
I am very confused about something: if I collect a credit of $100 and my max loss is $50, it means I have no risk? Does it mean I am guaranteed to make money? (I pay the $50 using the credit and I keep the remaining as profit). What am I missing?
No, it means you collect $100 initially, but the position could increase to a total value of $150, meaning you'd need to buy it back for $150 (paying out $150 when you initially received $100) at expiration.
The credit you collect is NOT profit. It's not a profit unless the position value falls below the initial credit and you repurchase it for less (collect $100 for the position initially, then it falls to $70, and buy it back for a $30 profit).
@@projectfinance What if I let it expire worthless? Won't I stay with the credit I received? (and pay the $50 max loss)
@@MarianBoricean correct you don’t have to close it before expiration. If it is fully ITM at expiration, the position would be worth the max value and you’d have the max loss. You could allow it to expire and you’d be left with no position. You’d still realize the max loss.
The only way the iron fly would expire “worthless” is if the stock price pinned the short strike at expiration. Then you’d have the max profit though!
@@projectfinance Yes, that is correct I will experience the max loss. But the "max loss" is less than what I received when I sold the spread. I don't care if I have the max loss if that amount is less than what I received. In your video at minute 14:26, your screenshot shows that in that particular case, the credit received was $347, then right under, you say that "Max Loss Potential = $153". So... what if I experience the max loss? I pay gladly that amount $153 and be left with the remaining from my credit. Where is my flaw in thinking?
@@MarianBoricean You are misinterpreting the credit received. In the specific example, if you sell the iron fly and collect $347, you sell the position when it is worth $347. If you experience the max loss of $153, that's because the position increased to a value of $500. The max loss comes from buying back the position at a higher price than you sold it. The max loss doesn't mean you are paying the max loss to close the position.
If you sell the iron fly for $347 and it increases to $500 (its max potential value in this case), you don't have a profit. You have a loss of $153.
If you want to avoid holding the position through expiration, you need to buy back the iron fly for $500.
If you do hold the position through expiration, you still end up with the max loss because the exercise/assignments will offset in a way that leaves you paying $500.
If the stock price is below $70, you get assigned on the 75 short put and auto exercise the 70 long put. The result is you buy 100 shares at $75 and sell the 100 shares at $70 (a $500 loss).
If the stock price is above $80, you get assigned on the 75 short call and auto exercise the 80 long call. The result is you short 100 shares at $75 and buy them back at $80 (a $500 loss).
So in both of the above cases, you would have a -$500 net outflow from your account, but since you collected $347 for the position initially, your loss is $153.
The simplest way to understand all of this is if you short the position for $347 and it goes to $500, you lose $153 whether or not you buy back the position before expiration or allow the position to expire ITM.
Hey Chris great content man! Would this be a good earnings strategy?
Hi Jerry! Thank you! Yes, a short iron fly is a good earnings strategy, in my opinion. That's if you believe the stock price will remain "inside the expected move" or not move as much as the options imply.
For instance, on a $100 stock, if the 100 straddle is trading for $7.20 in the weekly expiration cycle for earnings, the implied/expected move is about $7.20, or 7.2% in either direction.
If you think the stock will remain in that range, selling a straddle would be a trade that would profit if you're correct. However, you'd lose a lot of money if you were wrong, which is why the iron fly is a great strategy to protect yourself if the stock makes a huge move.
Of course, by purchasing the OTM options to limit your risk, you'll collect less option premium, which means the stock will need to stay in a tighter range for you to profit (when compared to when selling a straddle by itself and collecting more premium).
-Chris
@@projectfinance man your the best thanks Chris!
You got it!
Can you sell the iron butterfly early for a profit as long as your within the strike prices?
Yep, you can close a short iron butterfly whenever you want. It doesn't have to be within your strike prices.
Excellent!
Glad you liked it!
Great vid
Thanks, Imran! Always appreciate the comments.
-Chris
Great video, song at the end?
Thanks for watching! Haha I just Shazam'd it for you. It's called "Accidents Will Happen" ruclips.net/video/O3VkhzWa8fg/видео.html
It was some Copyright-free music I found on RUclips, so it may not be on the big streaming platforms.
isnt this the exact same as iron condor?
No iron condor sells out of the money at near the current strike price
My brain hurts now
you’ll get the hang of it
yo don't pump the volume on the outro. you voice is low, and the outro vol. is way too loud.
Sorry. super old video
InAGaddaDaVida
Wahahaha this guy. Too much info
Super old video, my bad!
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