Today, I am testing out a new that I’d like to add to my playbook. The idea came from the SMB Capital blog, specifically, from Greg Loehr’s posts on the broken wing butterfly. I like the butterfly over credit spread or iron condor because the Priceline (PCLN) volatility skew, as I track it, is somewhat flat at the moment. Below is the trade I was filled on:
PCLN JUN5 630/640/645 Put Butterfly at $0.45 credit per spread
If PCLN continues higher, I will let this trade expire worthless and keep the $45 credit per spread. That equals [$45/($500-$45)] = 9.89% return on risk. If PCLN goes towards my short strikes (640), I’ll take profits at 20% return on risk or I will actively manage the position, depending on price.
- Quick Take On The Markets & Watchlist
- Markets Keep Exploding And Options Watchlist
- Reader Question: Butterflies and Implied Volatility Skew
- What Led The Market This Week? (And Watchlist)
- Defensive Sectors Leading The Market & Watchlist
- Breaking Down This Week’s Winners & Watchlist For Next Week
- What Sectors Are Leading The Market?
- Market Strength and My Watchlist
- Implied Volatility Skew and What It Tells Us
- An Interesting Take on Selling Implied Volatility Here