The Road Trip Trade (RTT) is essentially a Broken Wing Butterfly (BWB) with a no roll risk off adjustment strategy. This strategy is a part of M3 concept, therefore, it makes it hard to “compare”. So I’ll discuss some common differences in the common understanding of each trade.
The M3 is a synthetic BWB strategy also. So the entries are similar.
Breaking the trades into 3 phases; entry, adjustment strategy and exit
The M3 ENTRY would be more resilient to explosive moves (up and down) and normal down moves assuming same days to expiration (DTE) and Delta number. There is always a tradeoff and the tradeoff is more draw down on the m3 entry with the slower grinding up moves. This can be overcome in the M3 with the M3U configuration but then you create the drawback of the RTT. We give you this option in the M3 program so you can experiment with both and experience the plusses and minuses.
The RTT also uses strict entry criterion when it comes to price. In many of our advanced programs we talk about “good entry days” and opportunistic entries on the M3 so this is the same concept.
Adjustment strategy: I’ll only discuss the up strategy for now, the down strategy is too long a topic…
The RTT up adjustment strategy is a risk off adjustment strategy by rolling in the upper long put. This adjustment is an adjustment we use in the M3 program but it is used as a loss minimalizing technique rather than something to make more money. The adjustment essentially reduces tent size and results in nearly no profit in up trending markets unless you happen to hit a down cycle OR unless you are extremely aggressive rolling in the upper long, in which case the trade takes on significant down risk. So you are left with the choice of taking your break even or small loss and hoping the market has a very large well-timed reversal or try and eek a small profit by raising the line and lose in the reversal.
The “standard” adjustment strategy on the M3 is risk off via widening the short strikes and thus widening the tent and raising the t+0 line… and then rolling up if needed to keep the larger profit zone closer to the asset price allowing a reasonable profit with a more normal market retracement. Of course, the trade-off is that a harsh pull back late in the trade might give a bonus profit in the risk off only strategy (RTT) and result in a loss on the roll-up strategy. Of course, the RTT can also lose during the late pull back when the risk off adjustment is too aggressive.
Also, the RTT is actually using this roll up/down strategy if the market is moving, by using time staggered entries. Keep in mind the RTT can get quite active being in 4 different trades when the market is moving.
The way Dan Harvey is trading the BWB, he is pulling the trade at the first sign of risk, which can be applied to M3 as well. You can get into some trouble trying to force the trade to work.
The point of the M3 being a learning exercise, that is true, most people take the concepts in the M3 program, fool with the various adjustment strategies, find the way they like to trade most, embrace the concepts they like and end with something like a Kevlar, Rhino, CIB, Weirdor or Road Trip Trade.
When it comes down to it, these types of trades are all very similar. They will all work well in a wide variety of conditions but none is the holy grail.
The point behind the M3 is that once all the lessons are internalized, YOU can create the trade that works best for you while having the knowledge to change the trade when the market conditions call for it.