Bearish Butterfly Strikes Again! The Bearish Butterfly trading strategy is a time tested strategy that is being tracked on the weekly Options Trading for Income by the Guidelines webinar series and has been since 2012.
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The Bearish Butterfly trading strategy was designed to be traded on the Russell 2000 Index which takes advantage of a variety of market conditions such as over extended up trending markets, volatile and very volatile down trending and sideways markets, as well as very smooth down trending markets.
Returns of this trade: This trade had a profit of approximately $8,755 or about 17.3% on planned capital in 52 days.*
Minimum Capital Required: $5,000 per trade
Example size: $50,000 planned capital (Planned capital is the maximum amount we are expected to get in the trade.)
Profit Target: 30% or $15,000 for this example. If we reach 21 days to expiration, we reduce our profit target to 10% or $5,000.
Exit Loss Trigger: 30% or $15,000 for this example
Trade Adjustments: If the market comes down too far, scale out or roll the position back. If the price goes up there are a series of price points where we adjust and add to the strategy.
Overlapping Trades: Yes
Why do I love this trading strategy? Can often play a bearish opinion and still win even with large moves against the position!
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LEARN THIS TRADING STRATEGY!
The Bearish Butterfly is a rule-based trading strategy that is designed to maximize results in very choppy and bearish market conditions on the Russell 2000 index. The minimum capital requirement for this strategy is $5,000 with a profit target of 10% to 30% The trade takes less than 15 minutes a day to manage. Click here to learn more!
The Bearish Butterfly is also one of three primary trading structures that are utilized in our highest yielding strategy, ROCK trading system.*
FOLLOW THIS STRATEGY!
Become a GO or a PRO member to follow the Bearish Butterfly trade as it flies high! This trading strategy is featured on the Options Trading for Income by the Guidelines weekly webinars along with eleven other profitable options trading strategies. This trading strategy is for Trading Success Blueprint traders in Stage 4 and above to focus on.
SEE OTHER BEARISH BUTTERFLY WINNING TRADE EPISODES!
Episode 117 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade had a profit of approximately $10,084 or 20.2% on planned capital. The maximum capital in the trade was only about $30,000 which would make the return over 32% on the actual capital used in the trade.* Click here to see this 15 year old win again!
Episode 107 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade had a profit of approximately $12,484 or 25% on planned capital. The maximum capital in the trade was only $23,210 which would make the return over 65% on the actual capital used in the trade.*
Episode 99 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade had a profit of approximately $5,000 or 10% on planned capital. The maximum capital in the trade was a little over $11,000 which would make the return over 42% on the actual capital used in the trade.*
Episode 93 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade had a profit of approximately $5,890 or 11.8% on planned capital. The maximum capital in the trade was approximately $20,039 which would make the return approximately 29.4% on the actual capital used in the trade.*
Episode 87 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade had a profit of approximately $7,869.97 or 15.7% on planned capital. The maximum capital in the trade was approximately $28,000 which would make the return approximately 28% on the actual capital used in the trade.*
Episode 77 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned approximately 12.7% gain on planned capital in 40 days!*
Episode 73 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned approximately 26% gain on planned capital in 55 days!*
Episode 58 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned approximately $5,840 or about a 11.7% gain on planned capital!*
Episode 38 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned about $7,300 or about 14.5% profit in 35 days.*
Episode 26 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned earned approximately 17% gain in 39 days through a down move of over 40% in the RUT followed by a bounce of over 200 points. AMAZING!*
Episode 23 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned about $11,592 profit or approximately 23% gain in 38 days.*
Episode 11 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned about $10,000 profit with a maximum capital in it of about $16,000 or about 60% of actual capital.*
Episode 2 – Bearish Butterfly Trading Strategy
Returns of this trade: This trade earned about $10,000 profit with a maximum capital in it of about $19,000 or about 50% of actual capital.*
Hi again. I am really enjoying learning about your options strategies. Question about the Bearish BF Strategy. Most example videos show it as an iron butterfly (10 short puts and 10 short calls at the same strike, with 10 upper long calls and 10 lower long puts, for example). I think, if I am not mistaken, that John said that this could be done with puts only (20 short puts, 10 upper long puts, and 10 lower long puts, for example). I have been back testing with the only-puts method. Is there any advantage to using one method or the other? Are the profit expectations the same? Thanks.
Synthetically the positions are identical however due to modelling deficiencies the Greeks on the positions can be very different. This can also trigger different types of adjustments in some situations. This being the case you’d need to also expect different results, sometimes drastically different results in some trades.
Hello. I have a question about how upside adjustments should be done in the Bearish BF Strategy. Should the short strikes of the second BF always be placed 20 pts above the short strikes of the first BF? Suppose the short strikes of the 1st BF are at 2000. The rule is that if RUT rises to 2040, then the 2nd BF is entered with short strikes at 2020. But what should be done if in just one day RUT rises way past 2040, for example it rises to 2100? To keep up with the market would it be better to enter the 2nd BF close to 2100, say with short strikes at 2080? If you could reply by email that would be great. Thanks.
RE: Should the short strikes of the second BF always be placed 20 pts above the short strikes of the first BF?
Yes
RE: Suppose the short strikes of the 1st BF are at 2000. The rule is that if RUT rises to 2040, then the 2nd BF is entered with short strikes at 2020. But what should be done if in just one day RUT rises way past 2040, for example it rises to 2100?
There is a scale in and roll sequence based on using the entry short strikes as a reference point. If the short strikes are at 2000 and the asset price moves to 2100 in 1 day you would do the math based on the roll sequence with a 2000 reference point and then exit your current position and reenter at the strikes according to the sequence. In this case you’d be at 2060/2080/2100 with the short strikes. There are examples of this type of scenario happening in other winning trade episodes.
To keep up with the market would it be better to enter the 2nd BF close to 2100, say with short strikes at 2080? No this would not be in line with the guidelines, please refer to the statement above.