SMB – Longer Term Broken Wing on SPXPM
This post is another in a series 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 and tracking hypothetical broken wing butterfly trades, in real time, using the weekly options. I was using AAPL, SPX and most recently SPXPM, and all six trades produced simulated profits ranging from 1% to 31% over those weekly time frames. Not bad at all.
But now I’m going to track a trade on SPXPM using the regular expiration June options, which have 22 days until expiration. The trade I’m following is the 1250-1240-1220 put broken wing butterfly for a credit of $0.65. The max theoretical risk is $9.35, but that loss should never be reached if managed properly. If the market sells off, this trade can work out very nicely depending on the speed and timing of the drop. And the worst thing for this trade would be a hard sell off in a very short time frame.
If the market stays above the 1250 strike by June expiration, then the credit would represent a profit of 6.9%. Here’s a look at the stock chart: