This post is the first in a series that we will be publishing over the next several weeks, tracking the hypothetical performance of the bearish butterfly trade  as it would have been  handled  according to our guidelines contained in SMB’s Bearish Butterfly Video Series.

On Friday, we initiated the March  bearish butterfly trade in the $RUT.    If this was  an actual live  trade, you’d need to set aside about $25,000  in your account in order to leave some powder dry for adjustments that you may need to make if the market rallies in an extreme manner after the trade commences.  At the time that we initiated our hypothetical  trade, the $RUT index was trading at  784. In accordance with our guidelines,  we placed a 5-lot put butterfly, centered at $RUT 760  below the market at a cost of 10.23 per lot.  So our total initiation capital level is a little bit over $5,000.  As of this morning, our position is up a little more than 1% of planned capital, but that means essentially nothing.   This trade can be active for well over a month in some cases and  how the market  plays out  over time–and whether we react to it with discipline– is much more important than the positive or negative P and L that will appear in the early days of the trade.

John Locke

Locke In Your Success, LLC

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 commisions. 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.

Risk Disclaimer