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Option Trading Strategy: Setup a Butterfly Spread

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Option Trading Strategy: Setup a Butterfly Spread ★ SUMMARY ★ Hey it’s Sasha Evdakov founder of Rise2Learn. In this video I want to share with you exactly behind What the Butterfly is when it comes to Trading Options and why you may want to trade the Butterfly. The Butterfly’s just a fancy name for a type of spread because it looks like a butterfly. You can trade a butterfly to the upside you can't really tell downside or you can trade it to collect option premium butterfly’s a very effective strategy because it uses a lot less margin and which means a lot less risk to be able to trade those larger dollar value stocks. First I want to share with you exactly what the butterfly is and what it looks like on a regular diagram and then I want to show you in the trading program and how to set up the butterfly. Posted at: http://tradersfly.com/2014/05/option-trading-strategy-setup-butterfly-spread/ ★ SHARE THIS VIDEO ★ https://youtu.be/YemFOAfsZ8Y ★ SUBSCRIBE TO MY YOUTUBE: ★ http://bit.ly/addtradersfly ★ ABOUT TRADERSFLY ★ TradersFly is a place where I enjoy sharing my knowledge and experience about the stock market, trading, and investing. Stock trading can be a brutal industry especially if you are new. Watch my free educational training videos to avoid making large mistakes and to just continue to get better. Stock trading and investing is a long journey - it doesn't happen overnight. If you are interested to share some insight or contribute to the community we'd love to have you subscribe and join us! FREE 15 DAY TRIAL TO THE CRITICAL CHARTS -- http://bit.ly/charts15 GET THE NEWSLETTER -- http://bit.ly/stocknewsletter STOCK TRADING COURSES: -- http://tradersfly.com/courses/ STOCK TRADING BOOKS: -- http://tradersfly.com/books/ WEBSITES: -- http://rise2learn.com -- http://criticalcharts.com -- http://investinghelpdesk.com -- http://tradersfly.com -- http://backstageincome.com -- http://sashaevdakov.com SOCIAL MEDIA: -- http://twitter.com/criticalcharts/ -- http://facebook.com/criticalcharts/ MY YOUTUBE CHANNELS: -- TradersFly: http://bit.ly/tradersfly -- BackstageIncome: http://bit.ly/backstageincome
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Text Comments (64)
steeleyes (1 month ago)
Asymmetric trading....????
mybetterfilms (6 months ago)
Dude I'm happy with $100-$300 per day or even a week and this should help right?
Sasha Evdakov (6 months ago)
The more knowledge you have... the more you can use it in the future... little bit at a time.
Peter Dylan (9 months ago)
get to the point
Sasha Evdakov (9 months ago)
+Peter Dylan thank you for your suggestion
SPAce the Spa (10 months ago)
Awesomely explained. Thanks much, Sasha. Do you have a video on reverse butterfly spread?
AMOL GAWANDE (1 year ago)
if I have credit spread and now trade turns  against me i.e sold CE 1 lot @ 150 premium & brought higher price CE @ 100 premium , now on expiry I will hv losses if it closes against me, in this situation can I convert the trade where at least  I can get my money back by converting the same trade into butterfly ?
Sasha Evdakov (11 months ago)
+AMOL GAWANDE it is difficult to say without looking at the premium, amount of time remaining, and many other variables and factors. Usually when you convert, adjust, or tweak positions usually take a slight hit initially in order to make up the difference in the profits later on or towards the end of the month so that way you can at least close out with a break even or a slight profitability on that side but this of course depends on the amount of risk you're looking to take on and how much Capital you're willing to put in when you make the tweak or adjustment
meme youyou (1 year ago)
Hi great video. If a have a sold a vertical credit spread and it went ITM, can i convert that to butterfly? Thanks!
Sasha Evdakov (1 year ago)
This is too difficult to maybe mention in the comments, but in theory yes you can convert a vertical into a butterfly.
Yat Suen (1 year ago)
hi Sasha, excellent video, wondering what trading software it is in your video?
Sasha Evdakov (1 year ago)
Thinkorswim in this example
Sindy Fernandez (1 year ago)
Great video Sasha, Im starting out to learn Option, will spend most of my day today watching your videos.. Thanks for sharing..
Sasha Evdakov (1 year ago)
You are welcome! - Thank you for the kind comment. I am pulling for you.
WhYsO SeRiOuSe (1 year ago)
WhYsO SeRiOuSe (1 year ago)
hello...(: what broker and website did u use in that video?thanks
The-oneN-Only (1 year ago)
Sasha Evdakov hello great video can you explain the channel trending more for beginners little bit more basic thank you very much !!
Sasha Evdakov (1 year ago)
Thinkorswim platform from TD Ameritrade
WhYsO SeRiOuSe (1 year ago)
I have a question (:. what broker/website were you in that video?
Gaurav Solanky (1 year ago)
Hi Sasha, thanks for your informative videos. I have a question for you, I am trying to apply same Butterfly strategy to Swaption. Now, as per my understanding rate at the expiration of contract will behave same as strike price in Option. Can you please confirm if I am on the right track, if not please correct me. Regards, Gaurav
Yat Suen (1 year ago)
yes, all floating rates canceled out, left with the fixed short and longs, the profit that you make is the netting fixed rate cash flows less your option cost
Gaurav Solanky (1 year ago)
sorry for not putting it in best way. I am trying to apply Butterfly strategy on Swaption, buying one call Swaption with low rate(lets say 5),Selling two Call Swaption @ fixed rate 5.50% and buying one call Swaption @6%. Now, in this case strike rate would be rate at the time of expiration i.e. floating and will behave in the same way the strike price behaves. so, the pay off will be based on spread and premium you pay for Swaption. Am I correct ?
Sasha Evdakov (1 year ago)
I don't understand your question clearly unfortunately. It may be best if you rephrase it.
Lincoln C Mitchell (1 year ago)
We are a big fan of Sasha, we have seen most of all his videos
terence wang (1 year ago)
Hi, Sasha, i have a question. lets assume the current price for apple is $100. with the butterfly spread strategy, you sell 2 call option at strike price @$100, and buy 1 at $90 and $110 respectively. my concern is, 1. if the stock price go beyond $110, there is only 1 call option @$110 to cover the loss. 2. why set up a call option at $90 strike price? How is it protect the account from losing money. Thanks in advance
Sasha Evdakov (1 year ago)
Well you sold 2 contracts and you have one contract for the downside protection and one contract for the upside protection. (Sold 2 and bought 2 for protection).... of course the amount of movement will still create either a winning or losing position depending on the spreads, time value, price, etc...
foki Farooq (1 year ago)
another great video sasha thank you. few question 1) why do we get a credit when trading Iron butterflies? is the credit received from iron butterflies is better then the debit paid for it? thank you for your great work, keep the tutorials coming
Sasha Evdakov (1 year ago)
Keep it simple.... You sell 2 contracts and you buy 2 for protection. The amount you sell is worth MORE than what you buy... hence the terms. If you sell 2 pairs of shoes for $400 and buy 2 pairs of pants for $50 - you still are $350 positive...
John Morrison (2 years ago)
Sasha Evdakov (2 years ago)
Thank you John for watching and your contribution with the comments.
Durrell Harley (2 years ago)
Great Video! I learned something new today.
Sasha Evdakov (2 years ago)
That's great :) Moving forward one step at a time.
Tuk Dasdo (2 years ago)
you speak very well and not too fast
kdisd5 512 (5 months ago)
*ToDay $1550* t.co/6walqWJIRT
Sasha Evdakov (2 years ago)
+Tuk Dasdo Thank you
Kurtie7 (3 years ago)
Thank you, Sasha...I'm learning tons....you certainly know what you're doing! I'm starting out...and,..I'm going to your website to see what's happening!
ec simo (2 years ago)
+Kurtie7 If you is interested in how to cash in on foreign exchange markets easily the greatest info that i've had was by using the Magic Monitor Blueprint (search google) without a doubt the most incredible site i've followed.
Kurtie7 (3 years ago)
+Sasha Evdakov Yes,.....Just taking a look------wow.....I'll keep you updated !!... Thank you..
Sasha Evdakov (3 years ago)
+Kurtie7 Ton's of knowledge on the website - much more than on youtube...
Perri Magnezi (3 years ago)
Sasha, after watching many option trading videos on you tube some of them on butterfly strategy your is probably one  of the best; however, I could not find an answer to my question how far from the stock price would you want to put the short strike price?  Is it one SD, 1/2 SD? what about the wings? how  far it would make sense to put the break even points given the IV? what is your rule of thumb if I may ask. Regards, follower
Sasha Evdakov (3 years ago)
+Perri Magnezi Hi Perry - depends... butterfly is just a strategy... it depends on the stock, the volatility, the market, etc. All these things will play a role. Comes down to managing your risk. Sometimes they are wide, sometimes they are tighter.... Sometimes we will do 30 Pt wide butterflies and put them far out of the money 15 points up ahead of the stock... Other times we have one centered... Unfortunately it is difficult to discuss this in a comment as a visual example would be better, but it is something you will have to play with after doing them month after month.
Steve Kaldi (3 years ago)
Steve Kaldi (3 years ago)
Steve Kaldi (3 years ago)
Excellent video
Sasha Evdakov (3 years ago)
+Steve Kaldi Thank you Steve
TheFOREXgroupLLC (3 years ago)
Do you have a facebook?
kingmike40 (3 years ago)
The types of people with big enough accounts to do these trades are not the type of people who have to use youtube to learn how.
Saeed Alkhulaidi (3 years ago)
great instruction and Videos thanks Sasha subbed  can you talk about the probability for options in TOS
Sasha Evdakov (3 years ago)
+Saeed Alkhulaidi I will see what I can do in the future. I try to keep the channel fairly simple for most to understand. I will put your idea in the suggestion box.
Yash S (3 years ago)
Great videos subbed
Sasha Evdakov (3 years ago)
+Yash S Thank you for watching my videos.
David W. Johnson (3 years ago)
Never cared for Butterflies.................Iron Condors are better
Tim Warren (3 years ago)
Awesome Video!!
TheTraveler (4 years ago)
I saw the share price was at $604 at the beginning? how come at 10:15 none of these options were ITM or ATM for the butterfly spread? don't you have to Buy 1 ITM Call, Sell 2 ATM Calls, Buy 1 OTM Call?
Sasha Evdakov (4 years ago)
+TheTraveler Welcome :)
TheTraveler (4 years ago)
+Sasha Evdakov I see, thanks for replying!
Sasha Evdakov (4 years ago)
+TheTraveler You don't have to... you can shift the butterfly more to the right or left depending if you are bullish or bearish... it is just another way to use the strategy...  The strategy you mentioned is the way many teach beginners for setting up tbe butterfly, but you can shift the strategy more over if you want depending if you are more bullish or bearish...
mycombs (4 years ago)
What software are you using in this video, and can a regular person access it?
Sasha Evdakov (4 years ago)
+mycombs Yes a regular person can... TC2000 and Think or Swim with TD Ameritrade
Glenn S. Marks (4 years ago)
Very impressive video... 
Sasha Evdakov (4 years ago)
+Glenn S. Marks Thank you so much Glenn :)
Glenn S. Marks (4 years ago)
I haven't seen any video where I can get information/clarification against every step. If I have to rank down the best videos of binary options you are gonna be second best after http://expertoptiontrading.com/oi/ . They are also describing each and every step for every possible outcome. Honestly, you people are doing great work. Thumbs up. 
Salvador Luna (4 years ago)
vega? delta? i'm lost
Sasha Evdakov (4 years ago)
+Salvador Luna These are called the option greeks.

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