Welcome to Part 12 of my series of articles on the Butterfly. In this week's article, we will begin looking at different ways to search for and construct a Butterfly.
Constructing a Butterfly doesn’t necessarily have to begin with an extensive search and filtering process. In fact, in most cases when I trade Butterflies I already know the stock or index that I want to trade so I can go straight to constructing the trade. Let’s take the SPY for example and construct a standard Butterfly, the quickest way possible, with Platinum set to January 9th, 2010.
After logging into Optionetics Platinum you will be either at the Sitemap or Platinum Start page. If you are logged into the Sitemap, click on Smart Search within the blue box titled Search Tools, and this will take you to Smart Search (which appears on the Platinum Start page too!)
Once you’ve clicked on Smart Search, the Platinum Start page should look like it does in chart 2. The next steps are simply to type the symbol for the SPY next to the radio button which says Stock Symbol, make sure this radio button is checked too, and then click the button Butterfly Put in the group of choices below. See where the mouse arrow is:
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Selecting Butterfly Put will open up a new window and give you a selection of various ‘At The Money’ Put Butterflies on the SPY. See Chart 3.
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This is now the fork in the road in finding our trade. Either we can click one of the results Platinum returned and there’s our Butterfly, or we take one of the results as a starting point and then tweak the trade from there to have it look exactly as we desire. In the next part of the series I will start to look at some of the ways of adjusting the trade at the outset to suit a different prognosis or risk profile. Stay tuned!
Manage your trades!