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Butterfly spreads are an excellent income strategy, but they are one of the most frequently misunderstood and poorly traded strategies among retail traders.  Have you had any success or failures with this strategy? I would love to hear from you in the comments section below.

I see a lot of traders using Butterfly’s and looking at the upper most point on the payoff graph. It looks fantastic when you can potentially get a 600% return, but realistically the stock will never finish right at the short strike and there are a lot more things to consider with Butterfly’s than just the payoff diagram.

In a few weeks Options Trading IQ will be launching a new course focusing purely on Butterfly spreads and going over all aspects of this strategy in detail. In this course, you will master the following:

  • What is a Butterfly?
  • Should You Use Calls or Puts?
  • The Butterfly Payoff Diagram
  • Why Should You Trade Butterflies?
  • Things To Keep In Mind When Trading Butterflies
  • Entering Trades In Your Brokerage Account
  • How to Set Profit Targets and Stop Losses
  • How to Choose Strike Widths
  • How to Successfully Leg Into a Butterfly
  • Adjusting Butterfly Trades
  • Butterflies and the Greeks
  • How to Pick Entry and Exit Signals
  • Using Directional Butterflies for Low Risk High Reward Trades
  • Using Bearish Butterflies for Any Market Environment
  • Why Broken Wing Butterflies are the “One-Size Fits All” Strategy
  • Reverse Butterflies
  • Trading Weekly Double Butterflies
  • Adding Extra Calls Or Puts To Protect Against Fast Moves
  • Using Butterflies as Part of a Combination Strategy

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  1. Broderick says:

    If one considers the use of the Butterfly Strategy, why not just go with the Iron Condor for a consistent payout over a broader range?

    1. Hi Broderick,

      That’s true for non-directional butterfly’s. My preferred method for using butterfly’s is to make a cheap directional bet, or use them as a hedge on other trades.

  2. Joey says:

    where do we put in our name and email? I do agree with Broderick, I am a little confused as to why you would use a butterfly over an iron condor or some other time based spread, but I guess that’s what the course is for 😀

    1. Hi Joey, I’m having some issues with my sign up forms right now. There is a box at the bottom of this post now, just pop your details in there and you’re good to go.

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Options Trading 101 - The Ultimate Beginners Guide To Options

Download The 12,000 Word Guide

Get It Now