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Butterfly Deploy and Adjustments

The document discusses a butterfly options strategy, including how it combines a debit spread and a credit spread. It provides an example trade setup and discusses various adjustment approaches depending on whether the market moves favorably or unfavorably.

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Karan Yadav
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558 views6 pages

Butterfly Deploy and Adjustments

The document discusses a butterfly options strategy, including how it combines a debit spread and a credit spread. It provides an example trade setup and discusses various adjustment approaches depending on whether the market moves favorably or unfavorably.

Uploaded by

Karan Yadav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Butterfly Deploy and Adjustments – With Credit and Debit Spreads

 Every strategy in options is just combination of Credit Spread and Debit spread like

Iron fly is combination of Two credit spreads


Butterfly is combination of Credit and Debit Spreads
Ratio Spread is nothing but Debit spread with extra sells

 So here will explain Butterfly Adjustments treating as two different strategies like
debit spread and credit spread.

Bank nifty Spot is at 43050 so I selected Strikes of 8th Dec Expiry .

Strike selection for bullish view :-


43200 ce buy single lot
43700 ce sell double lots
44200 ce buy single lot

I selected each strike with 500 points spread difference. You can select strikes with
300/400/500/600 points spread difference also. Depends on your view / risk / reward.

1
This is original Butterfly if you can observe this trade as a two trades it involved one debit
spread and one credit spread.

Debit Spread :-
1 Buy and one sell leg

2
Credit Spread :-
1sell and one buy leg

Capital :- 70k per 1 lot required.

When to deploy:-
1. If your view is directional then deploy.
2. If your view is sideways also you can deploy and adjust as per market movement.
3. Irrespective of VIX condition we can deploy this strategy.

Here will explain adjustment for this trade.


Case 1: -
--> When market is in favour
1) If you can see 5 to 8 % profit you can book and look for new opportunity.
2) If market came to sell positions i.e 43700 move hedges to 100 points i.e exit 43200 ce and
enter 43300 ce .
3
Exit 44200 ce and enter 44100 ce i.e loss become almost negligible so you can hold this till
expiry.

Case 2:-
--> When market is not in favour
1. find out last week low or swing low in Hourly time frame if it cross and sustain means our
view went wrong so now treat this butterfly as two strategies so our Credit spread will be in
profit so book that credit spread means
Exit 43700 ce sell one lot
44200 ce one lot

4
Now we have left with debit spread means 43200 ce buy and 43700 ce one lot .

Now convert this Debit spread to ratio spread by selling 44500 above calls or depends on
resistance levels we can sell calls and convert ratio spread of 1:1:2.

Case 3:-

Market Crossed Butterfly and didn’t give chance to make 1 st Adjustment: -

1) In this case if market is crossed our last buy position and crossed importance
resistance levels also that means 44200 ce with out any given chance that condition in
this strategy Debit spread will be in good profit we book this debit spread means

Exit 43200 ce one lot buy

43700 ce one lot sell

So now we have only credit spread which is in loss means

43700 ce sell

44200 ce buy
5
Now we need find support in chart in hourly time frame sell below puts.

If market take retracement to sell position means 43700 ce by that time we will be in
profit in this credit spread also book that spread and close everything with extra sell
also.

For Bearish view also we can do same strategy with put strikes with same
adjustments.
Keep Learning and Keep Growing 😍

Thanks,
Suresh Kumar
Twitter ID: @suresh_kumar047

https://twitter.com/Suresh_kumar047?t=faPKAFIR1ODA4OJ-U5Qx5w&s=08

Disclaimer: - These Strategies I have learned from paid trainers, youtubers,


books, some of the twitter handles, websites and google. These are not created by
me and nobody so anybody can learn and use. Just learning purpose i have
prepared this. So you can find someone using this strategy and future also
somebody will use these strategies so these are available for free everywhere.

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