July 2016 SPX BWB

Position Spreadsheet With Greeks:

Trade Tracking Spreadsheet (Opens in Google Docs)

Trade Overview and Plan:

The $SPX July 15 2016 BWB is a shorter term BWB initiated with 43 DTE.  The trade began as the 2045/2015/1975 Put Butterfly purchased for debit of 0.60 on 6/1/2016.  If SPX continues higher the position will be adjusted by selling verticals to lift the upper wing and/or performing a reverse harvey on the upper long.  If the market trades lower, we’ll either roll lower or close the trade depending on the timing, DTE, and open profit/loss.

The basic structure is a Broken Wing Butterfly somewhat close to expiration with the short strike centered around 25 Delta at entry.  Our goal with the shorter term trades like this is to pay a small debit and just take them off for a quick gain.  Smaller debits can be achieved by narrowing the wings while keeping the difference the same.  For example, a 40×30 BWB purchased for $50 has the same amount of risk and potential max loss as a 50×40 BWB purchased for the same price.

The maximum desired loss on the position is under $100.  The target gain is a 5-10% return on risk with the potential for more if the market environment is favorable.  If I was trading a two lot of the position, I would close half upon hitting 4-5%.

With many of the BWB trades the market can move quite a bit without causing significant pain.  At the same time, the yield on the position will be low if price trends strongly higher away from the body.

Trade Management:

The first management point for the position on the downside is around the upper long strike at 2045.  At that point, we begin to monitor the position more closely with the potential for action.  Trading down to the 1985-1995 area early in the trade would be our signal to roll lower or exit.

Fills (Actual fills from my real money account):

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Trade Images and Comments By Day:


SPX traded significantly lower this morning and the was down around max loss (around 10% of margin).  In an effort to protect against a potential fall lower, the trade was closed rather than carrying a larger open loss.  Shortly after exit the market rebounded and the trade would have been fine.  While the outcome is obviously frustrating, taking a loss would have been prudent had the market moved lower.

The biggest detriment to this position was adding the second fly for a small credit when SPX appeared to be heading higher.  Had the market continued higher at that point, the trade would have been better off.  Unfortunately, the market reversed from there and implied volatility rose considerably.


The trade took a little breath of air today and is still okay.  The position is now inside of 30 DTE.



I’m keeping a close eye on this position, but it’s still okay given what we’ve seen with implied volatility.  The main concern at this point would be a sustained, fast move lower.



The portion of the trade that is under pressure is the 1990/2030 spread that was added to adjust the trade for a potential move higher.  The spike in implied volatility is hurting the trade, but the pain is largely in that spread.  From a price standpoint, the trade is safe.  I’ll be monitoring both price and IV closely going forward.



The trade took a little heat today with the pullback, but everything is till within the realm of normal.  The market is still a bit higher than the body of the butterfly so it’s just a matter of waiting and watching for now.



The trade is healthy.  Right now we have 35 DTE so next week we’ll be inside of 30 DTE.



The trade is healthy.



The trade is healthy and everything looks good.  We’re a tiny bit long delta and that should start to shift slightly negative by later this week as the T+Zero line rises.



I was filled on the second order pictured above.  The trade is not sitting with 38 DTE and looks good.  We won’t be adding to the trade again, but we may make additional adjustments based on market movement and the Greeks.  Our hope is that the market will drift higher for a week or two before pulling back.



The position looks good.  Frankly, the market hasn’t really moved since we entered the trade.  If SPX gets above the 2,110 area with a little conviction in the near future, we’ll add or adjust.  For now, we’ll wait.



The P/L we saw printed on the position yesterday was inaccurate as I mentioned below.  Today it seems accurate.  We’ve seen minimal market movement since opening the trade and everything looks good.



The trade was opened this morning and all is fine.  I believe the EOD pricing is a little off and we’re showing a larger open profit on the position than actually exists.  The EOD print shows a profit of $35, but I think it’s more in the neighborhood of $10-$15.  Aside from that, everything looks good.



As of today, I’m pricing out some butterflies and they will be discussed in the Market Outlook video.  I’m going to be getting involved in a SPX BWB with around 45-55 DTE.  My current outlook on the market is neutral to bullish with the potential for change.  We have SPX sitting right prior resistance and the creates the opportunity for things to change.

The expirations I’m considering for the trade are the July 15th and July 22nd.  The position will likely be constructed as a 30×40 BWB with the short strike centered near 25 Delta.  That starting structure provides a wide range of profit in 14 days and we’ll be looking for a quick out before the end of June.  Our target entry price will be under 0.60 and ideally under 0.50.  Cheaper is better!