What is your “bread and butter” options trade?

Seth FreudbergGeneral Comments, Options Education, Seth Freudberg's Blogs8 Comments

Yesterday we held our second Options Tribe  webinar on the subject of an  SPX  butterfly trade that I  was involved in developing.  This trade has become my “bread and butter” trade  –the approach  that I am comfortable trading under almost all market conditions and which provides  a stable pattern of returns.

Almost every great options trader that I know  has his or her own version of a bread and butter trade.  What is interesting to me is how varied that trade is depending upon the personality of the trader in question.

I know traders who are in love with directional credit spreads. These are usually traders who have a strong belief in their ability to predict the direction of a stock’s price over a 30-60 days period.

Others are high probability condor fanatics. They love the high probability of a positive outcome and can live with the modest but usually steady  returns.

Others love calendar spreads–because of their flat deltas and the way they respond positively to rising implied volatilities in down markets.

Some love double diagonals for their flexibility and mild deltas.

I just happen to be a butterfly guy. I like the certainty of the expiration graph and   the large initial return potential   which allows me so much flexibility to modify  the trade without running out of income in the process of  making multiple adjustments.

The panelist on our webinar was a former mentoring student of mine–a guy I thoroughly enjoyed working with and an ardent student of the options trading game. Dave, like all of us, took some time before he began to find himself as an options trader.  He is in the process of developing his own bread and butter trade and he’s experiencing great success with his new approach.

My vision of the Options Tribe is to bring together great traders from all over the world to share their “bread and butter” trades with the other members of the community.   My goal is to inspire all of our members to find their own bread and butter trades and thereby find  their own personal way to derive steady income from their options spread trading.

I’d love to hear from you. What is your “bread and butter” trade? Why has it become your core trade?

Seth Freudberg

Director, SMB Options Training Program

The SMB Options Training Program is a program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: [email protected].

8 Comments on “What is your “bread and butter” options trade?”

  1. Is the video available? I got cut off with a message the webinar had ended around 5:30 and could not log back in.

  2. Yes Andrew we’re working on posting the  video files on this blog page. Thanks for attending the tribe meeting. We’re not sure why that glitch occurred–we’re looking into it. In the meantime, if you have any questions just send me an email at [email protected]

  3. Great session last night–I enjoyed participating.  I’ve been
    thinking about what is my bread and butter” trade, and I don’t think I look at
    it that way anymore.  I don’t want to depend on one trade, so my approach
    over the past 6 months has shifted to a “bread and butter”
    portfolio—something that has a smoother equity curve than its component pieces, which don’t require work (adjustments) at the same time or for the same reasons.  My non-directional
    trades (condor, Butterfly and Cal) are staggered and in different indexes.  I
    also have a directional strategy which attempts to hedge these non-directional
    trades.  In addition, I am working on a diversified markets long approach
    that uses a timing component to stay out of longer term down markets. 
    Theoretically, the non-directional strategies earn income during corrections
    and consolidation in the diversified market approach.  I don’t think there
    is anything terribly unique about what I am doing for the individual trade
    strategies, but how I approach it from a portfolio level may be different.

  4. Yes Victor  a lot of people love high probability  condors. But they can be deceptively dangerous. You really have to stay on top of your deltas and think about what a gap through the next day would mean to your position.

  5. Great,  challenging point Dave. The idea is not so much to have a SINGLE  bread and butter trade.Rather the idea is to establish a trade or portfolio of trades that fits your trading personality. If this time/index/strategy diversification  approach fits your personality best, and you really feel you will adhere to it in the long term, then that is great. I’d only warn against complexity. Sometimes traders get caught up in a “perfect” but unrealistically complex trading approach. But you are absolutely right–it would have been more appropriate to call it a “bread and butter” APPROACH–not  necessarily a single trade.

  6. The complexity of the trades is something that I have given a lot of thought about.  I have 3 core non-directional option strategies that trade monthly and one directional strategy in an attempt to hedge if the market moves in the direction of this trade.  My approach to the other trades (diversified market approach) is a very simple set of rules that don’t trigger often–it is more of a long term investment approach.  I suppose the underlying theme is diversification across all aspects of the portfolio: direction, timing, volatility, vehicles, complexity. 

  7. I have a couple of strategies that I use, but also happy to try different things, and love the fact that there are so many options out there for us options traders!

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