Options Playbook Radio 54: Butterfly Spreads, continued

In this episode we are continuing our coverage of butterfly spreads. For those of you with the hardcover book, you can find this information on pages 103 and 104. You can also follow along on OptionsPlaybook.com.

Today, Brian discusses:

• Two real strategies: a butterfly around IBM earnings, and a SPX
• Let’s look at what is happening with IBM
• IBM going into earnings
• Butterfly using IBM weekly options
• Focusing on the midpoint
• Maximum risk, maximum upside
• Remember not to go for a home run
• What might happen after earnings?
• Why do you want implied volatilities to decrease?
• Doing butterflies on indexes, using puts
• Maximum risk, maximum upside
• Differences between weekly options and standard options to keep in mind
• Adjusting your legs
• Don’t forget that index options are cash-settled, and have 60/40 tax treatment