Comments on: Broken Wing Butterfly – Live Trade

By: Home & Content Insurance

Home & Content Insurance — Mon, 13 Jun 2011 20:02:16 +0000

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By: mauricio

mauricio — Mon, 28 Mar 2011 02:29:36 +0000

Hi.
thanks for your wonderfull videos about this exciting strategy of BWB.
you said that you are going to share more info about them, how to select the spreads and make multiple trades.
where can i have access to that_

thanks for everything

mauricio

By: Owen

Owen — Mon, 21 Feb 2011 00:34:37 +0000

On the 1/3/2 ratios. All I can do is say that I’m sure it will work, but I don’t trade them using any ratios other that 1:2:1

Broken Wing Butterflies are really Back Ratio Spreads with a leg of protection. Using other ratios will certainly work and if you are willing to take the time to practice, they will become effective for you. Always make certain you have a limited risk trade! Back Ratio Spreads are actually limited risk, but your margin will not reflect it as such. If you don’t know what I mean by that, please do not trade them.

Always use proper money management – Control Risk First.

Owen

By: Owen

Owen — Mon, 21 Feb 2011 00:30:46 +0000

Steve K,

Yes, I route the trade to buy back the embedded – I route it as a GTC immediately after BWB is filled.

Sorry if I wasn’t clear on that.

Owen

By: Owen

Owen — Sun, 20 Feb 2011 23:55:10 +0000

Roger,
I have traded BWBs on only 2 products. I learned to trade them using the MNX; GLD is the only product I trade them with now. It’s not right or wrong, it’s just what I have found that works for me.

By: roger hebard

roger hebard — Tue, 01 Feb 2011 22:55:17 +0000

Thanks, for the broken wing – i have AIG stock and like the long term so I am hoping to apply some of your strategy to this. Is this an ok platform.
Thanks

By: steveK

steveK — Tue, 30 Nov 2010 03:24:16 +0000

Joe
Thanks for posting the adjustment part!
At a point in the video you say that you need to buy the credit spread you sold Immediately- I think you did not mean that- you would oviously buy it back after some time decay.

I also see 2 other butterfly positions- did you create this over time in the same way(ie buyinga bwb and purchasing the credit spread back to make it symmetrical)

I would really appreciate if you could email the notes you have on this entire trade.I understand that it is not always possible to make it totally risk free-but that is the ultimate goal!
Would you recomend using 1/3/2 butterflies and do the same thing-make the butterfly symmetrical after passage of time!

By: Ed

Ed — Thu, 16 Sep 2010 00:36:51 +0000

Hi-

Great video. Any chance you would be willing to tell us how you built up this position, trade by trade? It would really help me understand how the adjustments work, when they should be done, and when to open new positions.

Thanks for your help.

By: Noel

Noel — Tue, 27 Apr 2010 13:04:56 +0000

Thanks for the reply, the light bulb has just switched on !! Love your video’s on BWB’s I’ve been looking at them for some time on TOS, the risk reward seems better than vertical spreads. Can I ask you about any adjustment strategies you might use if the trade goes against you. Using TOS I have tried several adjustments but I’m concerned about putting in more good money after bad. Do you think an adjustment strategy is a good thing for a BWB or just close the trade for a % loss.
Cheers
Noel
Perth Australia

By: Owen

Owen — Mon, 26 Apr 2010 17:22:12 +0000

Hi Noel,
If the trade is in-the-money 4-10 days prior to expiration, I begin to look for an exit point. With any trade where you are short strikes, you are “cheering” for the underlying to land at the short leg of the trade. For example, if you own a butterfly, the most value the fly will amass is if the underlying is trading right in the middle (at your short strike).

I don’t hold these until expiration unless they are way out-of-the-money. For example, in MAR I had butterflies where I was short the 101, the 102 and the 104 strikes. I allowed all those to expire worthless and kept the original premium I collected. They were far enough OTM (out-of-the-money) that I wasn’t concerned. Ideally, if GLD had traded down to one of those short strikes, that butterfly would have gained in value, so I had no reason to sell them prior to expiration. If GLD would have traded down to say, 104, then my Long 106 Puts would have gained $2 in value while the short 104 strikes would remain worthless. (assuming a close at or above 104).

So the rule is: Don’t hold ITM (in-the-money) spreads into expiration. If you do, you will be assigned the underlying and while that’s certainly not the end of the world, it is not the objective of this trade style.