I use Iron condors frequently which is similar. What I often do is if the price action penetrates the short put or call, I use indicators like the MACD and the TNN Squeeze to signal if the price is going to continue in the current direction. If so then I close that part of the trade and let the long option ride. I did this today and turn what looked like a sure $1600 loss into a $300 gain in about 15 minutes. BTW nice video but it would be MUCH easier to following if you used charts to illustrate your actions.😀
@@figh761 I tested it, turns out that in order to profit, the rally has to be 40-50 points away, that means you are super duper wrong, otherwise it wouldn't make any profits.
By far the biggest gem u guys gave me was that iron butterfly on spx. I scalp spx but lately it only moves 40 each way. I backtested it last week and no days were red. I let most exp and before today the least made profit was 940. Today exp $5 which was a surprise. I thought red but I closed out my trade before 12. I stayed patient for spx to come back down and hit 55% to net 1200. Now usually I trade 1 lot to risk 5k to make max 2500. Today I went two lots risking 14k to possibly make 5k. Horrible RR but I managed to still be green and took home 1200. Yesterday was the first day I went live with this strategy. I usually have my order set on tos before market opens. My goal is 55% anything higher is just icing on the cake
The timing on this is imperative. What time do you generally enter the trade? 10am-11am, 11am-12 noon, at the open? Also rolling will only work up to a certain time in the day as well. Rolling after 2PM or so is not going to get you the premium needed to stay profitable in many cases especially if the VIX is where it has been in the last week or so. Finally, SPX closed at just below the short call strike but how much heat are you willing to take at that point, because if it hovered around the short call strike for a while (or above it) you are taking a ton of heat. What is the rule from that point. I suppose these are rules we all have to figure out ourselves, but it would be beneficial to discuss them as well.
@@figh761 at the beginning it was 3000 per contract minus the 1515 he took in, so $1485 is max loss if you did one contract. he did 5 contracts so multiply everything by 5 (he took in 7575, so -7425 would be max loss. so if you put it on, fell asleep until the market close, took no actions and it passes the protective put or call you would hit max loss. a better example might have been if he just did 1 contract, rather than 5, then just said its scalable
This is exactly what I've been looking for. I'm not US and I don't trade stock so have to make do with Bitcoin and Ethereum. They have their pumps and then are flat for quite some time. I think this could be perfect. Great video. Took a few views to sink in but I have a good enough foundation to now put it into practice, so thanks very much.
To do all this you need min a 10k account or margin and level 3 options level correct? I get you can manage the trade on the fly just need to know what I need to be able to use all these strategies
An interesting stategy but the video is confusing. At 4:50, the slide shows buying 10 puts at 3500 as well as buying 5 calls at 4170 and 5 puts at 4110. I have no idea what happened to the 10 3500 puts. Also, had they not had to perform the "butterfly roll", but the index went up a significant amount, the net income would have been a lot less.
I agree, saw no need to add that in the frame. Must have been a Clerical error! Also there was a line that said "Selling 5 4140 CallsPuts? Think just Clerical errors. But its all great information!
Thanks for the great content! Wondering if you would really allow price to close that close the call credit spread? What would be the difference if it closed at 4170 instead of 4169?
@@figh761 This is a really bad strategy if you're very bullish, the iron butterfly gives you max profits if the price of the underlying doesn't move at all: -_/\_- . When you roll the iron butterfly into an iron condor, you're effectively reducing the peak but expanding the range -_/¯¯\_- . (- being the line where you make 0 profit/loss). If you're very bullish you might want to buy a naked call to provide you with leverage. (Not financial advice)
How to determine that 30 points away for both wings? Why not 40 points or 20 points? Does it refer to the support/resistance or Delta or something else? Could anyone explain please? Thank you in advance.
Couldn’t you have also rolled the put side up for a credit (even though smaller than the debit for the call roll due to the lower delta) to increase profits here? Of course the market could turn around and you would possibly have to roll both sides down, but overall wouldn’t that be more profitable?
Hey Seth. Always enjoy your videos. I can do this as an Condor but if I try an adjust by selling the long or short positions, depending on direction as the day proceeds, and turning into a Butterfly the Margin Explodes! I will try it tomorrow on Paper Money and see if I am correct regarding the margin. Certainly is intriguing!
Hello, thank you for the video and the strategy. I took an SPX position following this strategy but when it got to having to roll, the cost of the new spread was more than what had been received initially entering the iron butterfly position. So there was no credit left as a profit. How did you end up with a profit in the trade you talked about in the video? Thanks
Nice. I am learning a lot of good stuff here. I know option strategies but I always keep finding something new. I have to test this butterfly to condor rolls. Will do some test trades and see how it goes. Thank you for this.
is this same as iron condor? or different? is there any risk involved in this method? For example, what if we are unable to fill the rolling trade at the last moment due to theta decay?
The difference between an Iron Condor and Iron Butterfly is simply that both the Call and Put shorts are at the same strike in an Iron Butterfly. As you see at the 5min mark when he enters, both call and put shorts are at the 4140 strike. And yes there are always risks involved in all strategies. If you didn't get the roll filled, that initial butterfly would probably be hurt. However, getting filled is only a matter of what price you're willing to accept. "I couldn't get filled" is not an excuse, just greed in execution :) Especially on SPX where there's tons of liquidity.
"call butterfly roll" pays more debit than the original short call credit. The example ended up with making profit because it did only one time "call butterfly roll". If the market turn around and roll over right after the "call butterfly roll" and drop below 4110 which would make the short put spread ITM or you would have to do another "put butterfly roll". So, the idea of "butterfly roll" is good sine it close the "would be ITM" call and sell another call spread. But if market is chopping up and down, not sure this method would still make money. Then what to do ? Another stratety ?I'm just learning. Advise would be appreciated very much
As with most other strategies, you would want to apply a stop loss. In your example, the trade would be in trouble for sure, and eventually it's better to just take the loss, walk away and live to trade another day. Not every trade will be profitable, and learning to take the losses while they're small is key to long-term success. Also, the more you learn, the more you can stack the probabilities in your favor. For instance, this particular strategy would benefit greatly from intraday technical analysis to know when/where to perform that roll.
You will get absolutely destroyed on big swing days which are common these days…you roll 2 times on one side then 2 times on the others side and build up a nice fat loss for the day. Backtested without the rolls and the trade by itself is a big loser.
Excellent quesion. In fact we crossed back under 4140 at 11:00 A.M. This should've required another adjustment or a close out at loss before lunchtime. I can't imagine they just go hands off in that situation with 5 hours left in the session...
This strategy would likely be far more consistent if you trade with p/l targets. You would want to put your wings around 1 standard deviation and exit with $2000 profit, or $4000 loss. Mind your support/resistance levels, and avoid trading on big news days. The rolling is a nice option, but you'll get killed with commissions if you're not careful.
Has anyone tried to fix the losing trade? I tried, but it was not a winning trade even with a small profit as the video mentioned. I think the problem is that when one side leg is tested, you will already be at a loss depending on how fast or slow the stock moves. So, if we close that leg and turn it into an IC, the loss you already had is bigger, and it will be hard to cover the loss and get a small profit even if the stock moves within the IC short legs. Has anyone tried his rolling?
This is a horrible trade. One will battle every 15-45min swing. Dig a hole on one side then dig a second hole on the other. Very stressful. One runs out of time (theta to sell). One could roll into the next to keep the nightmare alive.
After the roll price went extremely close to the short strike of the Call leg. The loss would have been significant if the trade would have expired with the short strike being breached.
So take the other side - if this system is very risky and loses regularly, you should be able to make a lot of profit with little risk by trading against it.
He initially bought 5 4170 calls for the 4140/4170 credit spread, so he had to sell the 5 4170's to close the initial spread; then he did another credit spread 4170/4200 in which he sold another 5 of the 4170's, which makes it 10 in total. Buy 5 4140's, sell 5 4170's to close. Sell 5 4170's, buy 5 4200's to open. Makes sense?
He does explain it but perhaps better said, he is doing a Sell To Close the original 5 protective CALLs and a Sell To Open 5 new CALLs for a total of 10 Sell transactions.
Except that he doesn't address dropping below 4140 at 11:00. Luckily it bounced back, but that opened the door to a major loss and should not be ignored
No way this roll would be a credit in real world scenario. If the price goes past your call strike, chances are the roll is going to be a debit. This video is just rolling before the call strike is breached, hence they imagined a credit.
0DTE trading is a suckers game. You don't need to even try it, just do your analysis, play with the numbers and you will see that there is no way you can extract any systematic profits with it.
Agreed. With intraday action so random, it is impossible to derive any kind of dominant strategy; the same strategy providing profit one day may give it back and then some the next
All options bets are odds/probability/gambling. You will lose some, but if you bet with the odds you'll win over time. Your winners should win by enough to pay for all your losses and have profit.
they are doing credit spread(s) via the individual legs here and are net sellers of premium therefore you want value to go down due to theta. if you're buying spreads on 0DTE, you still mitigate theta loss via your short strikes which will offset some of the -theta effect on the long strikes as the day progresses.
I lost 3000 dollars doing this strategy. He is talking non sense and didn't explain when to deploy a iron butterfly. My trade didn't cross both sell sides and I simply lost 3000 dollars
Funny how they explained what 0 DTE is and then started deep grinding into this complex strategy. Do you think someone who trade options, specifically SPX Spreads doesn't know what 0DTE mean? 😂
He probably should have made it clear that the 30-point distance was just an example. I would imagine they look at the daily expected move based on volatility to determine each day's point spread.
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I use Iron condors frequently which is similar. What I often do is if the price action penetrates the short put or call, I use indicators like the MACD and the TNN Squeeze to signal if the price is going to continue in the current direction. If so then I close that part of the trade and let the long option ride. I did this today and turn what looked like a sure $1600 loss into a $300 gain in about 15 minutes. BTW nice video but it would be MUCH easier to following if you used charts to illustrate your actions.😀
Shut up dude
Does it need huge margin?
@@figh761 You need a margin account to trade options and I'm sure you need a substantial balance due to the risk involved.
I also wonder how much margin you need to sell the rest off and leave only long position?
@@figh761 I tested it, turns out that in order to profit, the rally has to be 40-50 points away, that means you are super duper wrong, otherwise it wouldn't make any profits.
Excellent communication skills. Appreciated!!
You guys are amazing for sharing your knowledge! God bless you!
By far the biggest gem u guys gave me was that iron butterfly on spx. I scalp spx but lately it only moves 40 each way. I backtested it last week and no days were red. I let most exp and before today the least made profit was 940. Today exp $5 which was a surprise. I thought red but I closed out my trade before 12. I stayed patient for spx to come back down and hit 55% to net 1200. Now usually I trade 1 lot to risk 5k to make max 2500. Today I went two lots risking 14k to possibly make 5k. Horrible RR but I managed to still be green and took home 1200. Yesterday was the first day I went live with this strategy. I usually have my order set on tos before market opens. My goal is 55% anything higher is just icing on the cake
The timing on this is imperative. What time do you generally enter the trade? 10am-11am, 11am-12 noon, at the open? Also rolling will only work up to a certain time in the day as well. Rolling after 2PM or so is not going to get you the premium needed to stay profitable in many cases especially if the VIX is where it has been in the last week or so. Finally, SPX closed at just below the short call strike but how much heat are you willing to take at that point, because if it hovered around the short call strike for a while (or above it) you are taking a ton of heat. What is the rule from that point. I suppose these are rules we all have to figure out ourselves, but it would be beneficial to discuss them as well.
One easy rule: Set stops to prevent potential massive losses. I set mine at 2x on both of the short strikes.
Does the above said really works for you if you do stop loss @@dcarson9212
What is the maximum loss on this trade
Maybe I'm wrong, but thinking you could also move the put strikes at that point in the day to collect more premium.
@@figh761 at the beginning it was 3000 per contract minus the 1515 he took in, so $1485 is max loss if you did one contract. he did 5 contracts so multiply everything by 5 (he took in 7575, so -7425 would be max loss. so if you put it on, fell asleep until the market close, took no actions and it passes the protective put or call you would hit max loss. a better example might have been if he just did 1 contract, rather than 5, then just said its scalable
You guys provide fantastic content. Thanks for sharing
This is exactly what I've been looking for.
I'm not US and I don't trade stock so have to make do with Bitcoin and Ethereum.
They have their pumps and then are flat for quite some time.
I think this could be perfect.
Great video. Took a few views to sink in but I have a good enough foundation to now put it into practice, so thanks very much.
As I would call it close slightly below the roll. 90% of the time it might run thru those new call credit spread. What do you do then?
To do all this you need min a 10k account or margin and level 3 options level correct? I get you can manage the trade on the fly just need to know what I need to be able to use all these strategies
would an iron condor be as profitable as the iron butterfly?
Thank you Seth for this invaluable training and thank you SMB
If it didn't close otm below 4170 and you rolled the calls for a second time, would you still have made money?
No....
Stay away from ODTE.
Trading 0DTE is the royal road to ruining yourself quickly.
Seth, why not also roll up the put vertical to capture more premium?
This lesson is about 0DTE. They want to pocket the profit and avoid overnight risks.
They can always sell another Put Vertical separately
Market might also reverse and threaten the rolled up put vertical possibly causing an overall loss.
An interesting stategy but the video is confusing. At 4:50, the slide shows buying 10 puts at 3500 as well as buying 5 calls at 4170 and 5 puts at 4110. I have no idea what happened to the 10 3500 puts. Also, had they not had to perform the "butterfly roll", but the index went up a significant amount, the net income would have been a lot less.
I agree, saw no need to add that in the frame. Must have been a Clerical error! Also there was a line that said "Selling 5 4140 CallsPuts? Think just Clerical errors. But its all great information!
3500 is where the price was when he bought the options I’m pretty sure
Hey Seth great video! But quick question does the butterfly roll occur once price CLOSES past the break even or is it once price gets near it?
Whats gonna happen if there is a whiplash? - after you manage then the index drops sharply and go towards your long puts?
Does wash sale apply to SPX?
I need to learn to read the indicators! With strong Buy and sell signal?
Thanks for the great content! Wondering if you would really allow price to close that close the call credit spread? What would be the difference if it closed at 4170 instead of 4169?
The breakeven on the ccs is at 4175.5 so a close above that would be a loser.
@@VancesSpot if I am very bullish , should I use this strategy or any other strategy.please opine
@@figh761 This is a really bad strategy if you're very bullish, the iron butterfly gives you max profits if the price of the underlying doesn't move at all: -_/\_- . When you roll the iron butterfly into an iron condor, you're effectively reducing the peak but expanding the range -_/¯¯\_- . (- being the line where you make 0 profit/loss). If you're very bullish you might want to buy a naked call to provide you with leverage. (Not financial advice)
What camera did you use to shoot this video. Can you please share! Thank you for the into also!
as an active 0DTE trader I have to but quite wonder about this video...must SMB capital now clickbait with 0DTE make or what is going on here?
I wonder what happened to the long put at 4110?
How to determine that 30 points away for both wings? Why not 40 points or 20 points? Does it refer to the support/resistance or Delta or something else? Could anyone explain please? Thank you in advance.
Couldn’t you have also rolled the put side up for a credit (even though smaller than the debit for the call roll due to the lower delta) to increase profits here? Of course the market could turn around and you would possibly have to roll both sides down, but overall wouldn’t that be more profitable?
Papertrade that and tell us
Hey Seth. Always enjoy your videos. I can do this as an Condor but if I try an adjust by selling the long or short positions, depending on direction as the day proceeds, and turning into a Butterfly the Margin Explodes! I will try it tomorrow on Paper Money and see if I am correct regarding the margin. Certainly is intriguing!
Any update did it work for you
In the video he's going from butterfly to condor, you are doing the reverse.
SPX is cash settled so it is a great 0dte option to trade.
Hi mate, did you make good money with this strategy
Hello, thank you for the video and the strategy. I took an SPX position following this strategy but when it got to having to roll, the cost of the new spread was more than what had been received initially entering the iron butterfly position. So there was no credit left as a profit. How did you end up with a profit in the trade you talked about in the video? Thanks
Generally, you have to widen the strikes, or add a lot of time.
So you actually hold the options into the end of the day?
Pure genius 🤯
Nice. I am learning a lot of good stuff here. I know option strategies but I always keep finding something new.
I have to test this butterfly to condor rolls. Will do some test trades and see how it goes.
Thank you for this.
If the index closes at 1430, are we getting the full 7500
is this same as iron condor? or different? is there any risk involved in this method? For example, what if we are unable to fill the rolling trade at the last moment due to theta decay?
The difference between an Iron Condor and Iron Butterfly is simply that both the Call and Put shorts are at the same strike in an Iron Butterfly. As you see at the 5min mark when he enters, both call and put shorts are at the 4140 strike. And yes there are always risks involved in all strategies. If you didn't get the roll filled, that initial butterfly would probably be hurt. However, getting filled is only a matter of what price you're willing to accept. "I couldn't get filled" is not an excuse, just greed in execution :) Especially on SPX where there's tons of liquidity.
"call butterfly roll" pays more debit than the original short call credit. The example ended up with making profit because it did only one time "call butterfly roll". If the market turn around and roll over right after the "call butterfly roll" and drop below 4110 which would make the short put spread ITM or you would have to do another "put butterfly roll". So, the idea of "butterfly roll" is good sine it close the "would be ITM" call and sell another call spread. But if market is chopping up and down, not sure this method would still make money. Then what to do ? Another stratety ?I'm just learning. Advise would be appreciated very much
As with most other strategies, you would want to apply a stop loss. In your example, the trade would be in trouble for sure, and eventually it's better to just take the loss, walk away and live to trade another day. Not every trade will be profitable, and learning to take the losses while they're small is key to long-term success. Also, the more you learn, the more you can stack the probabilities in your favor. For instance, this particular strategy would benefit greatly from intraday technical analysis to know when/where to perform that roll.
You set P/L targets to exit the trade. For this setup, it would likely be +$2000 profit take/ -$4000 stop loss
Would you do this trade in a Choppy sea? I personally would not!
What is determining the distance that you are rolling the call side?
Its simple. Just see what the market closes at, and roll it one strike higher 😜😜
How come I see broker allow to trade up to 4:15pm instead of 4:00?
0dte expire at 4:00, but you can trade later dated options until 4:15
You will get absolutely destroyed on big swing days which are common these days…you roll 2 times on one side then 2 times on the others side and build up a nice fat loss for the day. Backtested without the rolls and the trade by itself is a big loser.
If you use the 0dte option what implied volatility do you not trade this?
You always trade it!
Thanks a lot for the strategy. Would you need to adjust the trade again if SPX crossed 4170 much earlier in the day l?
Excellent quesion. In fact we crossed back under 4140 at 11:00 A.M. This should've required another adjustment or a close out at loss before lunchtime. I can't imagine they just go hands off in that situation with 5 hours left in the session...
This strategy would likely be far more consistent if you trade with p/l targets. You would want to put your wings around 1 standard deviation and exit with $2000 profit, or $4000 loss.
Mind your support/resistance levels, and avoid trading on big news days. The rolling is a nice option, but you'll get killed with commissions if you're not careful.
@Bazooka Joe so how did you trade that day? I assume you took a loss if you didn't make any adjustments. Or you just use a very large stop
Has anyone tried to fix the losing trade? I tried, but it was not a winning trade even with a small profit as the video mentioned. I think the problem is that when one side leg is tested, you will already be at a loss depending on how fast or slow the stock moves. So, if we close that leg and turn it into an IC, the loss you already had is bigger, and it will be hard to cover the loss and get a small profit even if the stock moves within the IC short legs. Has anyone tried his rolling?
I'm still waiting for someone to come up with a Black Sabbath strategy.
You mean the Iron Man?😂🤭
excellent idea. listening to sabbath while putting on the trade but credit spreads make me paranoid!
So confused! Why would you ever hold a 0dte until 4pm???? I never heard of that! Isnt that insanely risky?
You guys have an error in your picture at five minutes
This would not work guys unless the stock trades close to the middle put and call . In most cases they don’t . SMB can be so ridiculous it’s a shame
what brokerage do you use for index options ?
use tastytrade
This is a horrible trade. One will battle every 15-45min swing. Dig a hole on one side then dig a second hole on the other. Very stressful. One runs out of time (theta to sell). One could roll into the next to keep the nightmare alive.
Honestly thought this was some wallstreetbets satire
After the roll price went extremely close to the short strike of the Call leg. The loss would have been significant if the trade would have expired with the short strike being breached.
This is incredibly risky. You could just as easily lose that $3,000, or more. This is a “big risk, small reward” play. Buyer beware.
If the market rallied big then he loses 7600 bucks? Or more?
I dort think this is a prop trading firm ..they would have lost already all the money doing such casino trades...no alpha whatsoever😂
But but he said Zero trading risk!
So take the other side - if this system is very risky and loses regularly, you should be able to make a lot of profit with little risk by trading against it.
@@HedgeFundOfOne Exactly
The only confusion is why he is selling 10 calls at 4170 when he did the 'call butterfly roll.' The first trade was only 5 calls at the 4170 strike.
He initially bought 5 4170 calls for the 4140/4170 credit spread, so he had to sell the 5 4170's to close the initial spread; then he did another credit spread 4170/4200 in which he sold another 5 of the 4170's, which makes it 10 in total. Buy 5 4140's, sell 5 4170's to close. Sell 5 4170's, buy 5 4200's to open. Makes sense?
@@RobbieIndar1 Thank you for explaining, and I appreciate your effort. I think I understand now.
He does explain it but perhaps better said, he is doing a Sell To Close the original 5 protective CALLs and a Sell To Open 5 new CALLs for a total of 10 Sell transactions.
Has anyone done this trade successfully for the last month since this video was published?
Please share your backtesting results.
This is wrong move. Should move the untested side into the money to form a GUT trade.
Yes, that was so simple.. .. a child could do it
Except that he doesn't address dropping below 4140 at 11:00. Luckily it bounced back, but that opened the door to a major loss and should not be ignored
@@notdan995 Youre right. Blowup an account REALLLY QUICK!!!!!!! Paper money account only till understood and well practiced!
No way this roll would be a credit in real world scenario. If the price goes past your call strike, chances are the roll is going to be a debit. This video is just rolling before the call strike is breached, hence they imagined a credit.
Wow
0DTE trading is a suckers game. You don't need to even try it, just do your analysis, play with the numbers and you will see that there is no way you can extract any systematic profits with it.
Agreed. With intraday action so random, it is impossible to derive any kind of dominant strategy; the same strategy providing profit one day may give it back and then some the next
Show the risk profile! That's all you need to do. These guys make awful videos. A picture is worth a thousand words and numbers.
This is just gambling. The net over time will be a loss equal to the sum of the fees unless the direction of the underlying index can be anticipated.
All options bets are odds/probability/gambling. You will lose some, but if you bet with the odds you'll win over time. Your winners should win by enough to pay for all your losses and have profit.
Clear as mud...😒
that is not 0 DTE, that is 1 Day DTE
no doubt that speaker is a very experienced man but unfortunately all this is very confusing for beginners.
Odte theta is terrible and will decay your option very quickly on any stagnant action or moves against you
they are doing credit spread(s) via the individual legs here and are net sellers of premium therefore you want value to go down due to theta. if you're buying spreads on 0DTE, you still mitigate theta loss via your short strikes which will offset some of the -theta effect on the long strikes as the day progresses.
This is a very fast way to lose a lot of money
Smb furus selling you a dangerous dream. They're just boring tasty trade with the same plan to 'teach' you
I lost 3000 dollars doing this strategy. He is talking non sense and didn't explain when to deploy a iron butterfly. My trade didn't cross both sell sides and I simply lost 3000 dollars
Funny how they explained what 0 DTE is and then started deep grinding into this complex strategy. Do you think someone who trade options, specifically SPX Spreads doesn't know what 0DTE mean? 😂
confusing
Just Get to the point man…
Please share your backtesting results.
He probably should have made it clear that the 30-point distance was just an example. I would imagine they look at the daily expected move based on volatility to determine each day's point spread.