Right now the general conditions are not good for butterflies or condors. Due to the way the individual options are being priced, butterflies, especially on RUT, currently cost MUCH more than normal and the fills have been very poor especially when you need to adjust something. This is resulting in losses coming much faster than normal, more capitol being needed for the trade and a drastic reduction the normal range the trade can handle. Since you paid too much for the butters in the first place, and the market is continuously moving in 1 direction, you will see very little benefit from Theta or Vega until the last 7 days before expiration. This is temporary and more “normal” conditions should return later in the year. Due to this, I would suggest temporarily reducing your position sizes until conditions become more favorable for this type of trade. I am working on ways to deal with this, the best way I’ve found so far is to buy $0.30 (same month calls) when the trade is put on using the same number of calls as the number of total butterflies you plan to have on the trade and then sell calls against them later in the trade. Back month calls have not been effective. Currently, I am still trading these normal size but am expecting lower returns, having more capitol in the trade than normal and I am aware I may be taking some losses.
The April 55 day trade is getting hammered and is on life support right now. Today I rolled the 660 Butterfly to 680. The trade is over capitalized; right now I have plenty of reserve to handle this but if much more is needed I’ll need to either close the trade, close one of the other trades or delay fully entering the May 55 day. Currently, the trade is near max loss but delta is pretty flat so hopefully we can stay in this. Position is below:
The method 1 trade had no changes:
I added a 650/700/750 butterfly to the method 15 today:
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