Example of How Apex Iron Butterfly Works

darrell · 2013-04-25 03:20:17 UTC

See this screenshot to see a trade we did yesterday in the P3 signals on an iron butterfly with examples

Signal

Explanation

dmc009 · 2013-04-25 21:30:12 UTC

I am going to sign up for the P3 signals on Sunday and wanted to know are you supposed to always buy and sell binaries at 50 as in your tutorial videos or in this case at a price that has been chosen in the tweet?

s_mark220 · 2013-04-28 15:44:33 UTC

You can enter short or long at $50, but you will miss getting filled on some the signals. $50 provides the best return. However, we sell at $43 or more and buy at $57 or less in order to avoid missing a trade.

http://apexinvesting.net/apex-p3-signals/

What is the risk on each trade?

For the P3 signal service the max risk on a Core trade is $57.00 – resulting in a max profit of $43.00

OR

You may opt to only do $50 Max risk for $50 max reward. Though you will miss some winning trades.

darrell · 2013-05-01 03:59:54 UTC

http://apexinvesting.com/p3signalinstructions/

ronin50 · 2013-05-29 00:05:00 UTC

Where can I find the outline of the “end of day premium collection” strategy? I understand how to do the iron butterflies, the hardest part is picking the best indices and timeframes for entry. Problems I run into are too much time to expiration, and not enough time to get the right risk to reward. Any tips where I can identify good butterfly candidates? Thanks!

darrell · 2013-05-29 19:42:00 UTC

We do them in the p3 signals. They are part of the service. The best way to find the best EOD candidates and butterfly candidates is using the brand new binary scanner 0- 60 minutes to expiration and risk 70-90

yellowpiproad · 2013-06-21 02:11:00 UTC

Darrell, Adding on to what ronin50 asked re EOD PC; when I was watching the scanner today there were no strikes at all for any FX pair at 3:00 expiration. Am I missing something on the criteria for picking/entering those. I had the scanner set properly, I’m sure.

darrell · 2013-06-21 04:54:00 UTC

Im doing a butterfly premium collection webinar next Tuesday.

Trend Trading Premium Collection

15 Minute Expiration Premium Collection

darrell · 2013-06-21 06:06:00 UTC

Most likely you clicked on ITM deselecting it and that is why nothing showed.

[quote=yellowpiproad]Darrell, Adding on to what ronin50 asked re EOD PC; when I was watching the scanner today there were no strikes at all for any FX pair at 3:00 expiration. Am I missing something on the criteria for picking/entering those. I had the scanner set properly, I’m sure.[/quote]

dca78_00 · 2013-08-22 21:36:51 UTC

Darrell- you talk about layering into these positions…Could you explain a little more on that?

Does that mean buying and selling the next strikes out from your original position?

I looked at that on a trade yesterday on YM.

My original position was a 14925 - 14905 range. I sold the upper strike for $25.50, and bought the lower strike for $70.50. The underlying expired inside the range, so I made $55, with a risk of $45 on both sides.

If I had added (layered?) a wider butterfly (14945-14885), I would have been able to sell the 14945 for $94, and buy the 14885 for $92. True it would have added another $14 of profit if the underlying had stayed within the wider range and reduced the risk on the inner butterfly to $31 ($45 original risk + $14 wider Profit potential). But, that is only if it stays within the wider range. Otherwise, your risk goes out the window if it flies away from you and expires on one side of both.

Granted, there was no news and it gave a 40 tick wide range, so it looks like it would work, but the risk/reward gets really unmanageable unless you exit the wider range when the underlying hits the outer strike price. You still take a big hit and you end risking $87-89 to make $69.

I didn’t know if that was what you meant by layering in. Am I on the right track?

Thanks, Brad

darrell · 2013-08-22 23:14:36 UTC

Legging in would be one side then the other

Your on the right track

Layering in on butterflies would be having ie a multiple intraday, daily, weekly butterflies on at once

Usually you would not layer in at the same time on the same expiration

ie adding on butterflies higher and lower as the market oscillates by legging in up and down over and over - its pretty advanced not highly recommended except for those with large accounts

jmart69 · 2014-04-27 21:57:20 UTC

Hi Darrell. This question is assuming that we make the trade and intend to let it go until expiry.

On this example of an Iron Butterfly if you had only won the buy contract (say you waited until expiry and it closed at 2836.001) then you would have profited $25 on that side and lost $70 on the sell side and conversely (had it closed at 2824 you would have made $30 on the sell side and lost $75 on the buy side. Did you put in stop loss trades to sell back the $75 contract at $43 and/or buy back the sell contract at $57 just in case the market hit the strike on either side?

Also assuming you did would it be uncommon for the market (if volatile) to hit both strikes and consequently filing both stop orders? This would then make the maximum possible loss $32 on top and $27 on the bottom for a total of $60. Would it make more sense to only put a stop loss on one side of the trade as opposed to both?

Thank you.

ronin50 · 2014-04-28 00:16:00 UTC

This is an interesting question, I have been thinking about this as well since I have been using the stop trigger more. Bear with me while I do some mental gymnastics on this…One of the neat things about butterflies is you don’t have to use stops and possibly get whipsawed out of a trade. I personally at best might use profit orders and that is it, even then, those are not necessary. Just in case the indice oscillates up and down and then I am out of the trade at a profit and the indice eventually expires OTM on one side therefore losing the trade.

For example, If you structure your butterfly with selling the higher leg strike at $25 and buy the lower leg strike at $75 you are looking at $50 profit and a possible max loss of $50. The indice can not expire above and below a strike at the same time. if your indice expires inside the “profit channel” you create (below your sell strike and above your Buy strike) you collect full profit from both strikes (-$75 risk of sell side + -$75 risk of buy side = -$150 risk; -$150 risk + $100 profit of sell side and +$100 profit of buy side = $50 profit . You are looking at a 1:1 risk here. You just need the indice to expire within the channel you create.

If the indice expires above your sell strike you lose the sell and win the Buy strike (-$75 risk of sell side + -$75 risk of buy side = -$150 total risk + $0 of Sell side + $100 win of Buy side = -$50 loss.

The inverse is true if you expire OTM below your buy side. You win the sell side but lose the buy side.

So why would you use stops? I suppose if you were looking to mitigate your risk in case the market takes off in one direction you could use the stop trigger to accomplish that and still profit from the other side.

The big question I have is how often does your target indice and time frame oscillate up and down to hit both your stops and get you out of the trade at a loss?

Can you place stop triggers on both sides? I don’t see why not, they are unique strikes. How tight or how loose would you have your stops? Could you mitigate your risk to $25 and possible get a 2:1 reward to risk ratio? If that were the case you would only have to win about 35% of your butterflies to be profitable.

You should test this out and let us know how you do. this may be a way of really increasing your risk to reward on butterflies and profitability.

If I were going to do this I would definitely put stops on both sides or none at all. just like profit orders to collect time decay or oscillation, it would have to be both sides or none at all.

I think I will have to experiment with this as well…

darrell · 2014-04-28 06:16:59 UTC

There are no stop losses on nadex.

We do have a stop trigger to say when you want to submit a limit order based on a trigger price of the indicative.

I always exit both at the same time due to the resin you discusses it could hit both sides by legging out.

Also when using the stop trigger on the scanner remember you can use the same price on two tickets at once or it will only do one of them so they need to be at least 1/10th different on the trigger price.

By taking profit on the one side and limiting your loss on the other it actually makes your risk reward ratio better than any other scenario. Also I prefer width as to premium so I prefer sell 15 buy 85 etc to lower the probability of a stop being hit

[quote=jmart69]Hi Darrell. This question is assuming that we make the trade and intend to let it go until expiry.

On this example of an Iron Butterfly if you had only won the buy contract (say you waited until expiry and it closed at 2836.001) then you would have profited $25 on that side and lost $70 on the sell side and conversely (had it closed at 2824 you would have made $30 on the sell side and lost $75 on the buy side. Did you put in stop loss trades to sell back the $75 contract at $43 and/or buy back the sell contract at $57 just in case the market hit the strike on either side?

Also assuming you did would it be uncommon for the market (if volatile) to hit both strikes and consequently filing both stop orders? This would then make the maximum possible loss $32 on top and $27 on the bottom for a total of $60. Would it make more sense to only put a stop loss on one side of the trade as opposed to both?

Thank you.[/quote]

darrell · 2014-04-28 06:25:13 UTC

Stop triggers are a personal choice

If you use 25 sell and buy 75 you are closer and increase your chance of being stopped and of it expiring otm

Yes you would use stops on both sides a take profit and a loss exit. So four stop triggers total.

If either side is triggered cancel the other side.

Also again don’t use the same trigger price make sure 1/10th of a tick off. See stop trigger course. Under education all courses.

If you use them on both sides you make your reward to risk greater but also risk the chance of it coming back in and loosing on a trade that may have been profitable.

The better choice is 15 and 85

It will be wider decreasing the probability of being hit

Max profit is 30 and if you exit one side at say 45 or 55 (depending I side) for a 35 loss and take profit on the other side at a 10 profit you lose 30 on a 30 profit trade with increased probability of profot do to it being wider.

Personally I prefer iron condors over iron butterflies in most circunstances.

[quote=ronin50]This is an interesting question, I have been thinking about this as well since I have been using the stop trigger more. Bear with me while I do some mental gymnastics on this…One of the neat things about butterflies is you don’t have to use stops and possibly get whipsawed out of a trade. I personally at best might use profit orders and that is it, even then, those are not necessary. Just in case the indice oscillates up and down and then I am out of the trade at a profit and the indice eventually expires OTM on one side therefore losing the trade.