## SPX 24 Hour Butterflies Expectency

Posted by aj on Wednesday, July 20, 2016

I wanted to share some interesting trading technology for SPX options. I developed software for exotic options which allowed me to sell iron butterflies on the SPX 4-5 times a week. However, with the advent of more expirations for the SPX, such as Wednesdays, Fridays, EOM, and the soon to be available Monday expirations, the same can almost be accomplished on the SPX.

Here is how the model works. We take the 1 day straddle divided by the 1 day atr (average true range). If the ratio is > .55, we have enough premium to evaluate converting the straddle to a butterfly. For tomorrow, the Wednesday 1 day 2165 straddle is trading at a .63 atr ratio (8.6/14.8), more than enough for our criteria. We then look to limit risk and create an iron fly. Since the straddle premium is 8.60, we can buy wings to create a 2145x2165x2185 iron fly for 8.00, which is then a .54 atr ratio.

Synopsis, selling the 2145x2165x2185 iron fly for 8.00, with no more than 12 points at risk for every daily bar the last 5 years, renders a net profit of $89,000 the last 5 years. This is on capital requirements of $2000, an enormous hypothetical return, as represented by the risk graph.

It is likely we will see daily expirations on the SPX very soon, so a long term 24 hour butterfly may be something to evaluate.

GoTradeSignals offers SPX option information via email for a low monthly price. This information can be utilized by the subscriber, or a financial adviser automatically implement the information on the subscriber's behalf. See our transparent trade details here: http://www.gotradesignals.com/newsletter-information.php

Here is how the model works. We take the 1 day straddle divided by the 1 day atr (average true range). If the ratio is > .55, we have enough premium to evaluate converting the straddle to a butterfly. For tomorrow, the Wednesday 1 day 2165 straddle is trading at a .63 atr ratio (8.6/14.8), more than enough for our criteria. We then look to limit risk and create an iron fly. Since the straddle premium is 8.60, we can buy wings to create a 2145x2165x2185 iron fly for 8.00, which is then a .54 atr ratio.

Synopsis, selling the 2145x2165x2185 iron fly for 8.00, with no more than 12 points at risk for every daily bar the last 5 years, renders a net profit of $89,000 the last 5 years. This is on capital requirements of $2000, an enormous hypothetical return, as represented by the risk graph.

It is likely we will see daily expirations on the SPX very soon, so a long term 24 hour butterfly may be something to evaluate.

GoTradeSignals offers SPX option information via email for a low monthly price. This information can be utilized by the subscriber, or a financial adviser automatically implement the information on the subscriber's behalf. See our transparent trade details here: http://www.gotradesignals.com/newsletter-information.php

Tags: spx options trading credit spreads iron condors butterflies iron butterflies