This post is another in a series that we will be publishing over the next month , tracking the hypothetical performance of broken wing butterfly trades selected by Greg Loehr of Optionsbuzz.com.
Over the past several weeks I’ve been selecting broken wing butterfly trades on AAPL and the SPX using weekly options and then tracking the hypothetical P/L of those trades as expiration approached. Yesterday I closed the fifth broken wing fly – a bearish SPX butterfly that was entered into for a 30-cent credit – for “even money”. That marks the fifth straight hypothetical profit, this time for 6.4% which is calculated by dividing the 30-cent profit by the max risk of $4.70.
Here’s how all five butterfly examples panned out over the one-week time frame for each trade:
AAPL +1%, +1%, +31%
SPX +6.4%, +6.4%
I was recently asked by a student if I could provide a historical return for the broken wing fly, but of course that’s not possible. However as we’ve seen in the past several weeks with these examples, we can say that this strategy gives a high probability of profit when entered into correctly. And if market conditions don’t change dramatically, then there’s the possibility of increased profit beyond the entry credit – just like we watched on last week’s AAPL example.
Trade safe!
Greg Loehr
Optionsbuzz.com
Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.
No relevant positions.
