OPR 379: When Good Butterflies Go Bad and S&P Iron Condors

·18 min·1 clip

Brian Overby reviews a butterfly trade in IWM that's down 34 cents with nine days left, prompting a discussion on adjustments.

The episode begins with host Brian Overby providing a market update, noting a down day with IWM down the most. He reviews last week's trade: a butterfly in IWM with September 17th expiration, bought at 87 cents and now trading at 53 cents, down 34 cents. Overby discusses the chart support from the 50-day and 20-day moving averages and a long-term trend line. He then details an adjustment strategy for the butterfly, involving selling the 228 strike call and buying an additional 236 strike call to roll into a short call spread, resulting in a net credit of $0.13 but increased margin requirement. Overby emphasizes this is not a recommendation but an educational example. He addresses general market nervousness, noting the lack of a 5-10% downturn in the S&P 500 and suggests covered calls as a basic defensive play. The episode then shifts to a new trade: an iron condor in the S&P 500 with September 17th expiration. Overby specifies selling the 4585 strike call and 4460 strike put, buying the 4590 call and 4455 put, for a net credit of $1.33. He calculates the max risk as $367, requiring a 13% move in either direction over nine days to hit. The episode concludes with contact information and disclaimers, reinforcing the educational purpose.

As heard by us

A moved-against call butterfly becomes a practical look at adjustment mechanics and the psychology of taking a loss.

Options Playbook Radio uses a call butterfly that has gone the wrong way as a grounded lesson in trade management. The host works through a position built with the 228, 232, and 236 strike calls, then explains how selling the 228 call and buying another 236 call changes the…

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Want a calm walkthrough of a call butterfly that is adjusted after the forecast goes wrong?

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