IRON BUTTERFLY Live Trade - - STOCK Options DayTrading - SPX 0DTE

hey traders i am back with another spin on my favorite way to trade the stock market if you've watched any of my previous videos you know that my favorite ticker to trade is spx my favorite time frame to trade is zero dte and my favorite strategy is selling credit spreads first half of the year i focused mainly on selling vertical credit spread so either a bull put credit spread or a bear call credit spread and then after the market recovered from the corona crash i started putting on iron condors so basically one of each right both a um bull put spread and a bear call credit spread and then sometimes i would do like a broken wing butterfly in the final hours of the day a couple of months ago a member of our service mentioned this iron butterfly strategy and since it could be done on spx and on a zero dte time frame i thought great this aligns perfectly with my training strategy also i want to give credit to a trader named jim olsen who crafted this particular setup so not the iron butterfly but this particular way of trading it i don't know him but i linked his website down below so i will share a live trade where i include how to set up the trade in both thinkorswim and e-trade and you can watch it work i try to include both a winner and a loser in this video but honestly since i've been keeping track of these trades i haven't had a loser so i'll just have to make a video at a later time showing the loser um but before i do let me show you what the iron butterfly i'm going to explain this right on the option chain i think it's the easiest way to visualize this so when i sell a regular vertical spread i come to the option chain and i try and get as far away out of the money um and still collect a decent credit so for me that's usually around 10 or 12 delta so if i'm bullish on the day i'll come to the option chain i'll go here and i'll sell this and hope that sps continues to trade higher for the rest of the day and that this decays to zero and that i keep whatever i whatever premium i sold it for if i am bearish on the day i come to this side of the option chain and i sell maybe this credit spread hope that spx continues to trade lower for the rest of the day and i keep whatever credit i received here when i trade in iron condor i do both of those things at the same time so i sell this call credit spread i sell this put credit spread and i hope that spx trades in this area and expires in that area and therefore i keep the credit that i received here and the credit that i received there when i trade a butterfly you come to the at the money strikes and you pick either the put side or the call side and you go short here too and then you put on equally distant long wings of course it would cost a billion dollars just to go short the two in the middle right so what makes an iron butterfly in iron butterfly is you are going short both a call and a put of the same strike right so you go short a 37 10 call and a 37 10 put and then you put on your equally distant wings all right so that's the breakdown of what the butterfly looks like on the option chain so here are the pros that i love about this trade and i think you will too if you're familiar with credit spreads number one the time in the trade this trade works so quickly um in a regular credit spread i can on it even on its best day it might work in an hour so for a regular credit spread for me to decay to 10 cents in the first hour of the day that's a fantastic day but the average time in trade for a regular credit spread is usually like four or five hours this trade if it's not working in the first hour then you can just cut it loose either for a minimal profit or a minimal loss but most of the time this trade works within an hour secondly this trade is non-directional so there isn't a whole lot of leg work to do pre-market um so normally i'd be looking at the futures activity overnight and other indicators that would help me choose a bullish or bearish vertical spread but this trade setup doesn't really require that it's just a very mechanical setup thirdly it's a pretty stress-free conservative trade so long as you have a stop-loss rule and you stick to it there's no chance of having a huge loss you can't really get a max you can't reach a max loss on this trade unless you're just super reckless and don't manage it at all and lastly like i touched on earlier this trade has a high probability of success it wins a lot so i started trading this a couple of months ago in early november maybe october i wasn't really keeping track of it like i do with my vertical credit spreads because i guess just in my brain i need separate accounts for different strategies so at the beginning of december i opened an e-trade account i put 6000 bucks in there just so i could trade this strategy and since i did that i haven't had a loser so i'm not saying that this strategy is 100 but um i just i haven't had a loser to show um and whatever the probability of success it is it's pretty high so i'll follow up on after a couple months of trading this a couple more months of trading this and see um how that account stands all right i'm gonna let my live trade play and then i'll talk about the cons if you don't want to watch the live trade which ended up like being more film time than i thought it would be so i didn't want to make the video super long but if you want to skip the live trade um scroll forward to this time good morning it's about four minutes until the market opens and normally i look at where es is trading so that i can set up my chart or set up my trade based on where spx will open however today's friday december 18th it is quad witching day it is also the day that tesla is being added to the s p so if ever there is a good day to sit out on the iron fly it's probably today but i'm still going to take one i'm just going to wait 10 to 15 minutes to enter the fly um and i will be back and i'll show how it is that i enter the fly at that time all right so it is six minutes after the market has opened this was the at the money strike the 3720 when the market opened and this was the price of the ironfly 2015 and now you can see that the price has actually increased so it served me well to wait um to wait a few until getting into this iron fly so i'll be back in about five minutes in the meantime i'm just going to show how it is that i actually set up the iron fly um i come to the option chain and i look at what the at the money strikes are um at the money is either this strike or the strike right so you have to use a little bit of discretion and of course sometimes it jumps around so now it's the 25 and the 20 on the call side so in order to set up the 50 wide iron fly you just right click on your short strike tap cell oops and iron condor and then you make sure that the short strikes match so here's your short here's your short and change that to 37.20 and then you're going to add 50 on the call side and you're going to subtract 50 from 3720 on the put side and that is your standard 50 wide iron fly and sometimes you can go out wider if you if the premium and your buying power um substantiate going out wider so like i said i'm gonna wait another couple minutes until i enter this okay so we're about 13-14 minutes into the market open and here's where the at the money strikes are so i'm going to set up my order for the 3715 ironfly so here are my matching short strikes and then i've added 50 on the call side subtracted 50 on the put side and here is where the mark is and i'm actually going to execute the trade in um an e-trade account that i set up just for um just for doing these trades so at the beginning of december i opened up a small account here so that i could um put on these trades here and but i'll do another video where i execute it in thinkorswim but today i'm doing it here in this small account so if i click on 3715 and i hit trade e-trade actually has an iron butterfly format so i have to make sure that the short strikes match so i'm selling the 3715s and make sure this is correct so oops i've got the wrong expiration date i know each rate has it listed as december 20th and tos has it listed as december 18th but december 20th is sunday so e-treat i guess just chooses the settlement date for their option chain so i'm going to send this for [Music] i'm just kind of looking at the tos option chain as well all right so i will check back in after this fills all right so i modified my order to 23.70 because i wasn't getting a fill at 90 and so it executed here at what time i don't know it doesn't tell me the time on the screen anyways it's 6 49 so i will check back in in 10 or 15 minutes and we'll look at the chart and see how this iron butterfly is varying all right so we've been in the trade now for about 20 minutes this is the this is the candle here that we entered the trade and this is where spx is trading now and this is our short strike right 37.15 so this is what my profit and loss looks like for one iron butterfly on e-trade it's just now going positive but it was as low as like 100 150 bucks when it when we were down here at the low so this kind of action one way down action is not good for the trade um but so long as we start to move up here closer to 37.15 it will recover but i was just looking at yesterday which was thursday um this kind of a day is a wonderful perfect price action for an iron butterfly because you can see it kind of stayed in this range bound in this range and it closed you know somewhere near where we opened so um anyway stays like this type of price action is good this type of price action is not good but that doesn't necessarily mean the trade won't work out it's just you're gonna see your trade go pretty red before it goes green if of course it goes green it needs to come back up to this level so market's been open now for 50 minutes um we've been in the trade for 20ish minutes so i'll check in again in 10 15 minutes it is 7 34 we've been in the trade for almost 50 minutes and i think when i was last on we were i don't know somewhere over here anyways we've continued to move to the downside this is what my p l looks like on e trade um still need to push back up into this level so i just wanted to update that and we will see what it looks like in another 10 minutes all right we are have been in the trade for 55 minutes now and spx has kind of started to crawl back up and this is what the trade looks like now i should have put in a buy to close order earlier and had i actually done that it would have already filled um but that's okay i'm going to close it now i'm going to put in my closing order so 23.70 minus a dollar 60 is 22.10 and oops i don't think you can see this preview i'm going to send that 2210 and when this fills i will have had a gain of 160 so it should feel pretty closely pretty soon i mean i'll i'll come back and update when it does a few minutes have passed and i'm having a tough time getting a fill here for 22.10 so you know i don't want spx to trade any lower because then my trade is gonna go red so i think i'm just gonna try and get filled for whatever i can here so that i can lock in my gains i originally opened up this e-trade account just so that i could trade these iron butterflies out of them um and i started trading them at the beginning of december and i haven't had a loser since so that's been one two three four five six this is my seventh trade um this month um but anyways i had wanted to like compare fills against tos but i haven't really found e-trade to be better than thinkorswim as far as faster fill times on multiple leg spreads so there's that so you see it's tapping my limit price but it's not filling me i'm not sure if i should just be patient or get out of it i think i'll just wait here another few minutes okay it just right after i pause that it just filled me so i am out oops i didn't realize my screen was cut off and i i'm still learning how to use this platform so anyhow um there's my filled entry and my filled exit so that's a net gain of 160 dollars minus whatever my commissions are all right all right so the total time in that trade was one hour and five minutes and i know i only traded one contract um but that was a pretty sketchy day to be trading it anyway since it was quad witching day and that was the day tesla was being added to the s p um and normally i do trade three contracts um it's just my personal rule that i don't like to trade more than ten thousand dollars in any one strategy so you know i see members trading much bigger size than i do five ten i don't know maybe more contracts than that and then scaling out so taking off a couple at a dollar sixty a couple more at 200 or whatever increments you like but obviously you can scale up as many contracts there's a much bigger profit potential out there than obviously just my one contract but i'm a conservative trader i don't swing for home runs i like small base hits i like to take my profits off the table early and i am not the kind of trader who gets like fomo about leaving money on the table i lock in my profits and i move on with my day all right the cons about this trade at least in comparison to a regular vertical credit spread number one is the buying power so it requires more buying power than a regular vertical credit spread um in order for me to make 160 dollars in a regular vertical credit spread it would tie up about thirteen to fourteen hundred dollars of buying power and in the iron butterfly it requires closer to three thousand dollars per contract i didn't mention this in the trade but my stop loss is calculated by taking the short strike and adding or subtracting the premium received so in my live example um had spx dropped to 36 91.30 that would have been my trigger to exit the trade all right the second con is is when the expected move is low when the expected move for spx is low that in effect brings my stop levels in tighter so if spx makes a extreme move one way or the other early in the day then it will kick me out of the trade you know i'll have to honor my stop-loss and and cut the trade so the bottom line is is this trade doesn't work if um iv if a volatility does not contract but really those are the only two things that i can think of um and those cons don't outweigh the pros for me so i will make another video on um think or swim and i'll trade more than one contract and you can see how long it takes me to reach my different profit targets because sometimes the difference between my dollar sixty order filling and my two dollar order filling is just a couple of minutes but sometimes it's 20 minutes but you can see how the price action of spx affects the profit targets for these iron butterflies and sometimes i see a lot of other traders squeezing way more money out of these things than i than i ever have um i just don't have the risk tolerance to let these things run um maybe one day i will for the sake of the team in this video but um otherwise i'm a pretty risk averse trader i like i said earlier i just lock in my profits and i move on with my day um all right thank you for watching subscribe if you haven't already um leave me your questions below and i'll see you guys next time bye

Channel: Axe Options

Views: 28,630

Rating: 4.9237189 out of 5

Keywords: spx, 0dte, stock, daytrade, options, trading, ironfly

Id: cF66rrEwiSw

Length: 21min 38sec (1298 seconds)

Published: Sun Dec 20 2020