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Compared to 2259, which was the previous cash and sweep.58. Opened one trade for this week, but on a positive note, my portfolio beta has been better. The problem is that I don’t have my profit targets hovering around the $spy and 1st std deviation prices.
 
Any clue what we're talking about this session?! Iron Flies, or Iron butterfly trades. I want to go thru the mechanics on how to build the trade properly, adjusting the trade when it goes south, and other caveats that will help decide whether or not to use this strategy.
Opening Trades
 

Sept 3-Sept 7

Day trade was placed
buying power effect ToSStrategy(Strikes)

# of Contracts
AMD
September 6th, 2018
60
149.95
Put credit spread(sold the 25 puts and bought 24 puts)

2
 
$AMD
Put credit spread opened this week, the only trade made. Built the trade on Sept 6, hoping the stock would continue its move up. I got lucky and got in at the right time as it reached its highest price, $34.14, approximately 7 days later.
Chart AMD
Closing Trades

Date Made
Maxium profit
Buying power effect thinkorswim
Type of strategy used
Day of closed trade# of Contracts
$NKE
8/7/18
100
138.45
Calendar Spred using the 80x calls
Win @ 1.75 (9/7/18)
1
The Q's
Aug 21, 2018
62
150.95
IC (-184x/185 -174x/173)
Won trade12 (9/6/18)
2
 
 
Trade was placed on week 34 At the time, the Q’s seemed to be trading in a consistent pattern. The stock price had stayed within a range of $10
 
 
 
 I sold two of these iron condors for31 per spread. I bought back these back for $0.12 per iron condor.
 
NIKE
Spread was bought on Aug 7th Used the 80-strike price for this spread If you remember correctly, we sell the front month contract while buying the back month contract at the same strike price. Traded this spread for$1.30, while selling it back to the market for $1.75. My thinking was that I needed some bullish exposure, and it looked like $NKE was on the rise up. It landed right at 80 towards the end of expiration with the front month contract.

 
The iron butterfly: How do we build it?
How does an iron fly look? This strategy is basically a straddle with tiny protection
1 ATM Put(same strike)
1 ATM Call(same strike)
1 OTM Call(different strike)
1 out-the-money put(different strike)
A synthetic straddle, using the OTM calls and puts as protection for the "straddle" legs The P/L diagram looks something like this:
 

The BE points
(Strike price of ATM put) - (credit received)
 
And
 
(Strike price ATM call) + (credit received)
 
Why do use them?
These are very similar to Iron condor trades, where we want to pin a stock within a certain price range. If the stock has been very volatile AND can stay within a range, this is good to use.
 
 
 
Make sure to use this strategy during high volatile market times If this strategy is sold during low-medium volatility times, the trade price can expand and blow up in our faces.
 
This type of strategy is similar to an iron condor strategy, but it is NOT the same Let's look at some differences between the strategies
 
Premium received
The Price of Max Profit
Winning Percentages
ROC( Return on capital)
Buying Power Needed
 
With the five points mentioned, three are worth discussing: premium received, buying power effect, and chance of success
 

 
Credit Received
The money received on iron flies is higher than the iron condors. The construction of the two trades are different. Since the iron butterfly is based off a synthetic straddle, straddles take in more premium than iron condors. An Iron condor, however, is essentially two credit spreads placed at the same time.
 
BP Effect(Buying Power effect)
In my opinion, the best is the cost to hold the iron butterfly. It doesn't cost much at all. Whichever strikes you choose, can give the trader an even lower holding cost. I've been fooled before in thinking that the cost of the trade is the max loss. This is not true. Make sure to understand the buying power effect properly, when I was first starting out I didn't take this into consideration.
 
Percent of Success
This may make the trader think twice of using an iron condor vs Iron butterfly. Although the iron fly takes in more credit, the strategy has less probability of success. Why, you ask? With iron flies, the stock price has to stay within a tighter range, making your range of error smaller.
Adjusting Iron Butterfly Trades
Similar to all the other delta neutral strategies we use, we don't touch the challenged side of the trade. We roll up the uncontested side, taking in more credit on the deal. If the iron butterfly strategy is being touched on the call side, leave it alone. If the trade goes against them on the call side, the trader would roll up the put side and take more premium.
 

The iron fly strategy is a delta neutral strategy, with great return, but less chance of winning. In determining which strategy to use, make sure to look at the cost basis and see which fits account best. Remember, the Iron fly doesn’t have as much room for error as the iron condor, making it a harder strategy for a good return.
 
The portfolio beta weight was 0,28. Excellent after closed out of the calendar spreads. Even though the beta weight is good, still my profit loss is not where I'd like it to be. My way of attacking this is by selling a few more iron condors, and hopefully have my P/L curve cover more of the higher side of the $SPY.
 
Quick Question: What would you like for me to talk about? I’m more focused on the smaller account guys, as that’s how I’m going to find my trade pattern.
 
If you have anything you want for me to talk about, please feel free to comment below or email me! I want to help you build your small account, so if you have any questions, shoot.
 
Please follow the Twitter page here for some trades I like to share.
I'm on pinterest as well, but not as active. Follow me on twitter instead.

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