Good morning everyone, and this is Timehawk from Xtraits. A little bit of a delayed start here. I know it's what six minutes past the hour now. I am just getting everything ready and set up, but we will get going in a couple minutes. Not too much longer. Just give me a few minutes, and I'll be ready to go. Thanks. All right, I am ready to go. So let's get started. Let's see. First, I'm going to switch over the display over. Let me know if you guys can see it fully, and if there's any issues, just let us know in the chat or ping somebody in our Discord. It's really one of the moderators because I am unable to be on Discord at the same time. See the display. All right, we got that up. Thank you guys for all the new followers.  I am going to be building a PC soon. So hopefully, you know, I won't have any issues with streaming and stuff.  Yes. And I know somebody was asking about recording. Yes, this will be recorded on YouTube as well. So anyways, let's get started here. My name is Timehawk. I am with Xtraits and welcome to our six option seminar, the six in the series. And this one is going to be on butterfly spreads. So I hope you guys have all been, you know, having a good week. It's been an amazing week on the market. You know, it's been running really high. We had a lot of really, really big movers, a lot of major breakouts on certain tickers, like, for example, Tesla, Netflix, I mean, you know, Baba, Baidu, whatever. There are so many growth tickers that were blowing up this week that it was hard not to make money if you were on the right side of the trade. If you happen to be on the wrong side, then you might have lost big too. But hopefully you guys all made money. So enough about that. Let's go to the next slide, which is more introduction stuff. And my slides not moving forward. OK, there we go. So introduction again, Timehawk, right? That's me. I am a analyst with Xtrades. And if guys aren't from Xtrades and are just here with us for the first time today, we are a trading community. We have a discord with over over 150,000 members. It might be over 160,000. It's been it's been a while since I last checked. But last time I checked, it was over 150,000. And that was a month or two ago. The Bulbasaur on the top right. I notice it's kind of cut off through to the the scene. But that Bulbasaur is my profile icon on this court. So that's how you recognize me. I've been trading for seven years, and I mostly focus on swing trading and the purpose of this course, right? So, you know, in this course, we cover everything from basics to advanced option strategies. If you're not as familiar with more of the basics of options, how options work, what the Greeks are, I highly encourage you to go back and watch those earlier sessions. And they are available via links on our discord. So those are posted in a few places. If you are on discord already, you can find that in our education post channel. And I've also pinned those videos to our options swing channel. But it's also you can also find it in announcements as well. But those are the places where you can find those links for those older videos. But basically, you know, my goal is to empower you in your trading by giving you more tools that you can use so that you can have an edge in trading so you can trade in any kind of trading environment. OK. So right now we are in full bull mode, like especially this past week. So it's been pretty easy trading. You can probably make a lot of money just going along calls or something like that, and that works well, too. There's nothing wrong with that. But sometimes, you know, you might be in a certain market situation like the market's really choppy and you want to have other options to play instead of just being directional or maybe you want to hedge a little bit, something like that. And that is the purpose of this seminar series is to go over other options. Other options that you can do other strategies that you can do to be profitable in all situations. OK, so I always like to go over real life examples. So you'll be seeing some of that before we get into the nitty gritty of which is the main topic of this seminar. Also, in regards to questions and stuff that you guys might have, feel free to pop them over in the chat. I'll do my best to keep up with the chat, but I think mostly I'm going to be answering questions towards the end of the seminar so that when people are watching this video, they don't have to listen to, you know, 10 questions in a row about a certain topic. And instead, you can listen to it at the end, because I know a lot of people are going to be watching this later as a recording. And so we'll just try to keep it as streamlined as possible for those folks. So, you know, try to keep your questions towards the end or when I ask, you know, if anybody has any questions, but feel free to drop them into the chat at any time. And then do we have any moderators with us today? I see young bull. Oh, hi, the bull is seven, two. I'm sure there's probably a few other people. But yeah, if you guys could, I don't know if you guys are able to stay the full time or not. You know, usually my seminars go one to two hours. I try to keep every single time I try to say I'm going to keep it shorter, but it always ends up being really, really long. And the more I talk, the more I realize there's more. Right. But yeah, if the moderators can help me keep track of questions. And, you know, just at the end or when I ask, you know, if anybody has any questions, if there's any questions I haven't answered, if you could just repeat that and drop that into the chat. And then I'll get to that. So thanks for that help. All right. Before I move on to the next slide, I'm going to do my usual, you know, disclaimer, right? The purpose of this course is for educational purposes, right? Past results are not guarantees of future results. Anything that I may send this is merely just my own opinion and is to be used for educational purposes. May or may not be profitable, right? But basically anything I say is not a buy or sell recommendation. Just my own opinion. That's it for the disclaimer. Let's move on. I photo warrior and good morning to you all. So I'm really excited about this topic today, butterflies, right? So the table of contents, right? So we're going to have an options definition, quick run through. I'm not actually going to go through all those details, but I just want to include those slides in here. It's watching the video so they can pause it if they don't know some terms. They don't know what the Greeks are, things like that.  I'm just going to whiz through them. And then during the actual process of going through butterflies, I may explain, you know, certain points go back to some of the definitions. If I feel like, you know, the audience may not understand certain topics, because I'm sure there's folks here who have a variety of background. I have more advanced knowledge of options in some of you. You may just have to start it out this past week, for example. But yeah, then we'll be going over what is a butterfly spread. And then after that, we're going to be going over butterfly variants. So I won't be focusing too much on the variants because there's a lot. Mostly for this seminar, we are on debit butterflies. OK, so there's also credit butterfly, but we're going to be focusing on the debit ones. And there is actually a few debit ones, but we'll get to that when we get there. And then I'm going to talk about how to manage the trade. And mostly this is going to be through real life examples that I have or have traded in the past few months or this past week. And then I'll just show you what I did, how I did it, why I did it. Right. And at the very end, we're going to have a Q&A. And again, I asked that you guys talk more about your questions towards the end so that we can streamline this process. Blackpamper, will we be talking about reverse iron butterflies? So no, I will not be talking about iron butterflies. Oh, I know that's what you did there. It's reverse iron butterfly. I still won't be talking about those just because of time limitations. I'd be mostly focusing on three different types of butterflies, but you'll see what they are when we get there. Good question. Hey, Roy's dad. Nice to see options swing gang here. So what are options? This slide, I will explain. So I view options as basically insurance, right? You know, textbook definition is your financial derivative for underlying security that offers the owner of the contract. So that's the option, right? The right to buy or sell at a pre-specified price. And that is the strike. So if you have a call strike at, I don't know, say Netflix, 520 calls for 716, that gives you the right to exercise at any time to buy 100 shares of Netflix at 520 shares at any time by expiration, which is, I think, in that example, I said 716, right? So a few weeks from now. On the other hand, if you have puts, for example, 500 P on Netflix, 500 puts, 500 strike puts, that gives you a right to sell 100 shares per contract, right? And so this right to buy 100 shares or sell 100 shares basically means that you have a leveraged position. You're paying a premium to own a pseudo 100 shares or you're selling. So or let's not get into to selling. Let's just stick with buying for now. But for puts, for example, you're paying a premium or like, you know, as an insurance, if the stock, if you own 100 shares of the stock and you want to protect yourself from a fall in the market and you're like Netflix right now is at 530, I don't remember why it closed yesterday, but, you know, 520 to 530 somewhere around there, say that you would think Netflix is going to drop or the market is going to crash next week and you want to protect yourself and you're like, well, the minimum price I'm willing to accept for my Netflix shares is $500. So you buy a $500 put for three dollars. You're paying a three dollar or three hundred dollar insurance, right? Because it's multiplied by 100, right? So if your contract costs three dollars, that's three hundred dollars. You're going to pay three hundred dollars to guarantee that I can sell Netflix at five hundred dollars, which was a strike of that put. That is what the purpose of options are. They're really insurance.  And if you're playing a spread, now you don't have to own the shares because you have the right to buy a hundred shares. Now you have and then you're selling someone else the right to buy the hundred shares. But basically now you're trading the difference between those two strikes, right? That's what a spread is. You're trading that difference between those two strikes.  The same thing applies for puts, but it's to the downside. So that is what we do as options traders. We're leveraging that ability without having to own shares. And that ties into Greeks as well. I'll touch in on that in a bit. But why options, right? Because they're versatile, volatile, and I quote unquote, valuable, right? Because you are getting extra value instead of having to own 100 shares for a certain type of move. You can just use a options contract where you're paying a premium to own 100 shares at a certain price. That is what you're doing. Maybe, hopefully that made sense. But if it didn't, I'm sure there's a lot of better videos out there that explains this kind of topic. OK, all right. Just checking with chat here to see if there's any questions. But all right, looks good. Next slide. These are just options definitions. I'm not going to talk about these. Hopefully, you're familiar with them. If you're not, just join our Discord. And we have a glossary page for these kinds of definitions. Intrinsic value is, sorry, intrinsic value when the call strike is in the money. So the difference between the current asset price and the option strike, that is your intrinsic value because your contract actually has value. If I exercise right now my call, for example, 520C on Netflix and Netflix is at $530, I can exercise my call, my right to buy 100 shares at $520 and I can sell it at $530. There's already value in it. I can gain $10 per share just by doing that. So that's why those contracts have intrinsic value. Extrinsic value is when you get any value on top of that intrinsic value. And also, if the contract is out of the money, then it's pretty much all extrinsic value. That's just the premium. All right. Not explaining these slides as well. Greeks, OK. Also not really going to try to go too much nitty gritty but we're just going to talk about Delta for a second. So Delta, I know a lot of people know that it measures the change in option price when the stock price moves. The higher the Delta is, the faster your options price is going to gain or lose value as the underlying moves. So Delta also represents what equivalent of shares you own. So really it's the same way, it's saying the same thing, it does the same thing, but it's just a different way of thinking about it. So if your Delta is, for example, 50 or 0.50, depending on your broker and how they display the Delta. But it's 50, 0.50, same thing. If that's what your Delta is, that means that instead of owning quote unquote 100 shares because an options contract gives you the right to buy 100 shares, you're getting 50% of that value. In other words, you get 50 shares. So it's like owning 50 shares when you own that contract. And this is more important when you do more advanced option strategies and you're trying to keep Delta neutral, et cetera, et cetera. And you don't want to play the actual move and you're just trying to collect data. So I just want to mention that. But data here, NASA decay and option price every day as the expiration gets nearer.  So data is really important. And a big reason of why we do spreads and advanced complex strategies is because we want to take advantage of data. We want time to be on our side instead of against us. And so that's why we do these advanced option strategies. Why data matters. So this is just a chart. As you get closer to expiration, it's exponentially decaying for that option value. And this is why we usually like to play about 30 to 45 days is when a lot of people recommend to play options because you get that value of premium burn. And that's when talking about selling options. And the same thing applies when going long options. The reason why you get longer calls is because you don't have as much decay. Right? So it's just a balance between move and decay where you think that risk reward is. This is just another chart showing the difference between in the money, out of the money, and at the money options and how data decay works on them. You can look at that on your own time. And I know I might be talking a little bit fast for some people. But that's just usually I'm just trying to go through as much material as I can. And right now I'm reading chat here. Since Netflix is $500 per share, this is from World On. I was about to say World On. But anyway, since Netflix is $500 per share, if you get assigned, so assignment of 100 shares on one of the legs using butterflies, that will be $50,000. Yes, that's correct. Is it possible to increase the strike price and modify the butterfly to avoid sign? You're on Robin Hood and you have less than $25,000. So we're going to hold on to that thought. We're going to talk a lot about how to manage butterflies later on. And hopefully that answers your question. And if not, you can ask again at that time. Or if I remember, I'll try to expand a little bit more on those concepts. Thanks for the question, though. All right, so real life examples, if you guys are from our Discord. You probably know that I have been doing a Robin Hood challenge account. Original goal, original start was $2,000 or $2,040. And my initial goal was $100,000 by end of the year with a stretch goal of $1 million, right? So I started that in April 1st. If you've been looking at winning trades or a watch list or anywhere, you've probably been seeing me spamming about butterflies like for the past few months. So it was about time that I did this seminar. But that account has grown from $2,000 on April 1st to $71,900 as of yesterday market close. So that's about three months, right? About three months of trading butterflies. I only did butterflies on that account. So there's a lot, a ton of examples of butterflies on that Discord, on our Discord at Xtrades. If you're not part of Xtrades already, please do join. But yeah, it's been a really, really amazing journey for me so far. And I think I can hit $100,000 probably in the next two weeks if the market cooperates, right? So on to the next goal. But real life examples that I posted yesterday in winning trades. So this was a nine-day hold on shop. As you can see, I opened it on June 16th. So that was sometime last week, middle of last week, I think. I think that was when it might have been Monday. When was June 16th? That was June 16th was Wednesday, okay. So I was looking, I remember a lot of people were posting about shop setups over the weekend, last weekend. And it looked really, really good and it was breaking out. I think this is not the first time I played shop. I played shop a few times before this too. But this was the trade I just closed yesterday. And I entered it, you know, a really, really wide butterfly from 1400 to 1500. That was a debit part of the spread and the credit part of the spread was 1500 to 1550. This might not make that much sense right now, but I'll get into that later. So this is not a normal butterfly. This is a unbalanced or a broken wing butterfly, right? A debit broken wing butterfly. But you know, basically I gained 370%, right? And the reason why this was successful is because shop when I'm on a crazy massive run and I just happen to have good strikes for it. So, you know, after you get a setup, this is true about trading for anybody. No matter how much you know, no matter how much you've traded, you know, we try to predict the market, but it's hard to predict the market. Anything can happen. You just do the best you can to try to find the best setups and then you position yourself appropriately with the best trading strategy for your trading style.  If you do that, you know, sometimes you'll lose, right? Sometimes you'll win.  And that's really my recommendation for anyone. Like, you know, just because something works for me doesn't mean it will work for you. My goal is to just introduce you guys to as many different types of strategy as possible and present the pros and cons. And you guys find your own trading style based on, you know, what you learn, what you experience. No better teacher than experience on the markets. How do you monitor and adjust butterflies? We will go over that in a future slide. Thanks for the question, though. Trading genius, you're asking about alerts and stuff and how I turn my account. I do, you know, I do post alerts and stuff, but I'm actually going to talk about that later as well on how to find place and, yeah. So stay tuned for that. That'll be towards the second half of this seminar. All right, next slide. What is a butterfly spread? So what you guys may or may not already know, a butterfly is a neutral, and I put a little asterisk there, a multi-leg strategy that can be viewed as a debit spread and a credit spread combined, okay? So that's how I view it. I view a butterfly as a debit spread and a credit spread combined. So all you're doing is you're buying a debit spread, right? And that's where you buy, we use the calls, for example, you say you buy Netflix 520 and I sell the Strike 550. So that's a debit spread, right? A credit spread is on the other side. So using Netflix, for example, again, say that I sold a 550 call, 550, twisting in my words here, but, and then I'm gonna buy 580. And that's just to cover my risk of selling that 550, right? So that's called a credit spread because I'm receiving net income or a credit for that trade. So now I have a debit spread and a credit spread because a butterfly, you know, a regular butterfly has the same width of the wings, the debit spread and the credit spread should be the same width, right? So 520 to 550, 550 to 580, both of them are $30. And I'll actually talk about this later so I don't know why I'm talking about it here. But, you know, that is a credit spread and a debit spread combined with the same width. So you have no risk on your credit spread or your debit spread other than what you put in play because they are both the same width. They, you know, that's just how the play is set up. So it's a defined risk. Your maximum loss is a debit pay. And it's also a defined reward because your maximum profit is gonna be achieved at the short strike. So in this case with that Netflix example is 550. So the most you can gain out of this play is gonna be a difference between your in the money long strike and your short strike. So 550 minus 520 is $30. That is your max value, okay?  And we'll go in the actual example with all the numbers on the screen later. And also a butter spread is good when IV is really high. So IV is implied volatility for those who don't know and high IV rank, which I will hereby refer to as IVR. So that's IV rank. So when IV rank is greater than 30, that means that premium is really, really elevated and it is good to sell contracts for premium. And a butterfly spread is, it can be a debit or a credit play, right? But you are selling two contracts in the middle strike. And so that is what we're trying to take advantage of here with a butterfly spread without doing naked selling. So basically the other way that people view butterfly spreads is that it's actually a short strangle. And a strangle is a type of strategy that requires a really big move in the underlying to make money, right? So a short strangle is the opposite where you're trying to pin down the asset and that doesn't move away from those strikes so that both of those options expire worthless and you collect max premium. So that's what a short strangle is. A butterfly spread is kind of the same thing, but instead you now have protection because you have two long calls to protect yourself so that you have a max risk instead of being completely naked. And so that's the other way people view butterfly spreads. I prefer to view it as a debit spread that is made cheaper by doing a credit spread. So I reduced the cost of that vertical debit spread, right? But that's how I view it. And then now for the asterisk on neutral. So butterfly is neutral as long as it is within those strikes of your wings, right? At the base, the body, sorry, not the base. So in the case of the Netflix example, that would be 550, right? That would be where we would be neutral. So all our regular butterflies are neutral. They can be modified to be directional. So while there are, if you are doing it at the money butterfly and otherwise you're selling those strikes at where the current price is, that means you are true neutral on that ticker. But if you shift all your strikes up or down, you are directional up to that point where that middle strike is. So I don't know if that makes sense or not. But this is different from like say, a long call or a long put where you are completely directional. There is no neutrality at any point in the trade. You're either making money or you're losing money, right? But with a butterfly, you wanna pin it to a certain price. And so you are neutral at that middle strike price. And then if that middle strike price is not what the price of the stock is currently at or the other asset you're trading, then you are directional up until that point. So that's how you use butterflies for directional as well as neutral. Let's see what else did I put here? So usually I'm gonna be talking about debit butterflies but there are also credit variations in the butterflies. I'll talk a little bit about them later but I won't focus on that for the purposes of the seminar. I may do further seminars in the future that go into other types of butterflies, right? And directional bias is determined by delta. So remember we talked about how delta is like owning X number of shares of the stock. It's also how much the options price changes per move in the underlying. You think about it makes sense because if you own 100 shares, right? Stock price goes up by $1 then you get $100 more, right? Because that's how much you move. And with options contract because if your contract is deep in the money then it gets really, really close to one. And so at that point it's almost like owning 100 shares of the stock. And so that's why when you have deep in the money contracts delta is close to one because it basically means that you're almost like it's almost like you're owning 100 shares of stock. So I don't know if you, for example, for Netflix I'm sure if you pull up your brokerage or counter something and you go look at the lowest call strike, I don't know what that is but let's just say it's $5 strike. I'm sure that the delta is gonna be like 0.99 whatever, right? Like practically one because that, you know there's almost no chance that Netflix is gonna go below five is basically like owning 100 shares of the stock. And at that point the premium of that contract is gonna be almost the same as buying 100 shares of the stock anyways. So it's really not much of a difference there but that's delta, okay? So directional bias is determined by delta. So basically when you have a butterfly you have a net delta because you're buying and selling contracts.  So that's an easy way to determine that if you can do the quick math for yourself or you can use an options calculator and it will just spit out your net delta at you, okay? Example of that is optionsstrat.com which we will be using later. All right, I'm gonna catch up with chat real quick before I move on to the next slide. Getting questions about do you post all trades to your challenge account? No, I do not post all trades but I do, well let's put it this way. I put them all somewhere on the Discord but I will not necessarily alert all of them. So for example, it might be on the watch list or I might mention it in chat like in Swing or something that, hey, I'm looking at taking display and then every weekend I am putting out a personal butterfly watch list at least until I am done with this challenge account and that actually lists all the plays that I'm talking about, yeah. So usually I take plays off of that. All right, all right, so more questions. Is there a website? Yes, it's optionsstrat, sorry, I didn't finish that question. So for those people who aren't are watching this later or on another platform other than Twitch because I know this is on YouTube as well. If you guys are on any of the other platforms I am multi-streaming this to multiple platforms at the same time but I'm only gonna be looking at the Twitch chat. So if you have questions, please drop by our Twitch chat to drop them, it's twitch.tv slash xtrades and I am catching up questions here but from it's Nasty Nate. Is there a website where it grabs the butterfly for me or question? And yes, that is optionsstrat.com. We'll be going over examples using that later. Butterfly options can be used in bull or bear market, correct? That question was by Trading Genius. So you can use it in bull or bear markets, you can use it in neutral markets. A very versatile strategy, you can use it in any, pretty much any situation. It may not always be the best strategy to use but you can use it, okay? And so that's what I wanna explain again. Reiterating here, everybody's got a different trading style. What works for me may not work for you and I'll explain why I do what I do and the reasoning behind it as well as opposing cons. But yeah, we'll get there when we get there. All right. I see a few other questions here but they're all questions that I will answer later in future slides so I'm not going to keep repeating myself. So let's move on. Okay, so long call put butterfly spread setup. So the first thing I wanna do here is explain how to set up a butterfly. So for a long butterfly spread, this is just a vanilla butterfly, okay? It can be calls or puts, doesn't matter. What the ratio of the setup is, you're gonna buy one, I'm just gonna say call for this example, okay? Buy one call, sell two calls and then buy one call. So you got your credit spread and your debit spread, right?  And so you add those two together, make sure those sold strikes have the same strike, right? If it's not, then you got a condor play, okay? I'm not gonna talk about that. But buy one, sell two of the same strike, buy one and that forms your butterfly. Have the wings equal distance from the center short strike. So make sure that they are the same, same distance. Both calls and puts have the same profit profile if strikes are the same. So for example, and this is why I keep using Netflix is because that's the one I wrote on my slides. But for example, if I took Netflix July 16th and I bought to open, that's what BTO is by the way and STO is sell to open. If I bought to open one 520 call for Netflix on 716 and then I sold to open two 550 calls, same date, right? 716 and then I buy one 580 call for 716 for Netflix. That forms my long butterfly spread, okay? So you see that it's the same distance between everything, right? 550 minus 520 is 30, 580 minus 550 is also 30. What is the same, okay? So that's an example of a directional butterfly because actually Netflix is, sorry, I should clarify this. It is an example of a directional biased butterfly, right? Because it is a neutral strategy, but I add directional bias to it by shifting to strikes. Because right now Netflix is somewhere between 520 and 530. I don't know what to close that, but I think it's somewhere like maybe 528 around there. So I'm directional because I want Netflix to move up to 550. Now, an example of a neutral butterfly is where you're gonna be going long one in the money, sell to at the money, and then long one out of the money. So if, for example, Netflix was at 530 at close on Friday, yesterday, just for example, right? That's not what to close that, but for example, if it has 530, then I am, and I'm gonna open a neutral butterfly. I don't think Netflix is gonna move much. Then maybe I'm gonna open a 500, 530, 560, okay? So same thing, same setup is just where your strikes are that determines directionality. And now I mentioned earlier that it doesn't matter if you do calls or puts because the profile is the same.  Well, you know, I put the answer here, but your short strike should be out of the money, right? Why do we want our short strikes to be out of the money? Because when you are shorting a particular strike in the example of calls, that means you're selling someone else the right to exercise those calls, right? So in this Netflix example here where I sold to open to 550C, I'm selling someone else the right to buy 200 shares because I have two contracts with it, right? 200 shares of Netflix at $550 each. And if that is deep in the money, say that Netflix is at $600 on Monday, not saying it will be, but say for example, then this strike is deep in the money and maybe that person wants to exercise a strike. Highly unlikely, right? But you know, there's a chance. Usually there are certain case scenarios where people will want to exercise early. Usually people don't exercise early, but if somebody does, for example, and is deep in the money, $600, they were like, okay, I wanna buy Netflix at $550 because Netflix is at $600 right now, I am going to make bank on this, right? That means that they can exercise their contracts and suddenly me being the short seller of those contracts, I'm on the hook for 200 shares because I have to deliver 200 shares to this person and they're just gonna pay me $550 per share. And currently Netflix is at $600. I do not wanna buy Netflix at $600 to sell at $550 because that means I would lose basically what the other person is gaining, right? So this is why your short strike should be out of the money because if it's out of the money, then no one's gonna exercise those calls. Say Netflix is at 5.30, which is around where it is at right. If somebody decides to exercise 5.50 calls, which I have no idea why anybody would do that, but say they did, then they're saying, I'm gonna buy 100 shares of Netflix for $550 each times the number of contracts that they're exercising. And I'm gonna be like, sure, why not? I'm gonna buy 100 shares of Netflix times the number of contracts you have at $530 and I'll sell to you for 550, a free money, right? So there's no reason anybody would ever do that, but just for illustration purposes, that is why your short strike should always be out of the money from where you're currently at. So basically, long and simple of it calls or puts, just depends on what direction you are, same as when you're getting long calls or long puts. If you're bullish on a stock, get calls because that means that you're gonna be selling to open a higher strike.  So long and simple, we do short strikes should be out of money and we decide calls or puts even though the profit profile is the same if the strikes are the same because we don't want the risk of assignment, however low that might be. And even in the case where you are assigned, I would say, don't worry about it too much. That's why you have wings, right? So in this example again, 550 calls, somebody exercises it, you're on the hook for 500 to buy 100 shares of Netflix to deliver over at $550, right? No problem because you have a 520 call that you can exercise and say, I'm gonna buy Netflix at $520 and I'm gonna sell it to you at 550. In other words, you just made max profit on that debit spread part of the butterfly. On the other hand, if both of your contracts are assigned, then basically you're at your max loss, which is the debit you paid because you can exercise your 580, right? And you can exercise your 520 and then you sell both at 550, then basically you're at net zero. So basically you just lose whatever your debit part of the play was. You can never owe more than what you put into a butterfly because you have wings to protect yourself. And that is why we do wings. So we wanna short the options to get a premium. That's what we're trying to do. We wanna collect that premium, but we wanna make sure that we are defining our risk and not putting ourself at unlimited risk, okay? And I know naked selling and stuff gets a lot of bad rap, but in reality, if you have a really, really large account and you manage it appropriately, naked selling isn't actually that bad, but I don't do that much myself, but I know that folks at Tasty do it a lot. So if you wanna learn more about that, I would follow up with them. So I'm gonna demo it on options strategies to show you what it looks like so you can visually see it, okay? I'm gonna pull that up right now. And while I do that, I'm also gonna read chat to see if there's anything I need to catch up on. Okay. Question, how far out of money can one get to be safe? I mean, really with a butterfly spread, you're always quote unquote safe because you don't lose more than what you put into the trade, right? All right. I don't know if that answered your question or not, but if it did not, just let me know. And I wish somebody told me this before, but I realized that every single time I've done these seminars that it's been really, really difficult to see this option strat page because I had it super zoomed out and that's because I wanted to see everything on one page. But when looking at it on a video seminar, it's so small that you can barely see it. So I'm just gonna zoom in here so you can actually see it this time. This is options strat.com. This is a butterfly on Amazon and I'm actually not gonna use this one because this is not a vanilla butterfly. So let's pull up another one here. I'm just gonna use Netflix as our example because that's what we keep doing. Just for visualization purposes and keep it consistent, right? So we did 580. So I'm dragging this top bar here represents the buys and the bottom bar represents the sells, okay? So I bought 520, sold 550, bought 580, right? So 520, 580 is on top and I sold to 550, that's why there's a two here. And another tip on option strat is you can change the quality of the options contract by clicking on the little flag of the price or the strike and then you can edit it. But it'll also tell you what the bid and ask is as well as all the Greeks. So if you wanna do any quick math, you can do that. And also if you bought the price at a different price than what it is and you already took the play and you're not using this for planning purposes but you already took it and you just wanna figure out where you stand right now, what does it look like from here? Then you can edit these prices as well to change it, fit what you actually bought it at. All right, anyways. So this is what it looks like, 520, 550, 580, profit, loss, chart. Why is this coming out as a credit here? That doesn't seem right. This is supposed to be, oh, did I edit the price? Yeah, this is not 470, why is it 470? All right, there, we fixed it. I must have accidentally, I don't know, dragged 470 over to this price when I was clicking back and forth. I was like, there's no way this is supposed to be a credit play. Okay, so this is a debit play. Right, if I opened it at closing price on Friday, which is probably not what it's gonna be at, on Monday open, but if that's when I opened it, this play would cost me $815. My max profit is $2,185.  So it's 550 minus 520 is 30. So that's $3,000 minus the amount you paid for the play, which is $815. So your max profit is $2,185. So a lot of people always get concerned when they start thinking about spreads when they're coming from just long calls or long puts and you're like, but I'm limiting my profits, right? I can't make as much money. But the thing is, most of the time, you're not gonna be making exorbitant amount of money. There are exceptions, of course. For example, this past week, if you took Tesla calls or space calls or whatever, those stocks blew up, right? And they went sky high and then some of them retraced a little bit. But if you got into calls early, you probably made a lot of money. But those situations are, I mean, they happen often enough, right? But most of the time, you're not gonna be able to catch those kinds of plays. And this is why we do these spreads, because most of the time, we're not gonna be able to achieve those kind of crazy gains. And with these limited risk strategies with spreads, where we're limiting our risk, more so than if I just got a long call. For example, if I got a long call on Netflix for 520, it would cost me $15 is an 88 cents. And this play right now only cost me $815. That's half, you know, about half the price. As long as Netflix doesn't go over at 550, this play would actually net me more money. So that's the point, right? You can set up the strikes in a way to make more money with spreads. There is going to be a strike that expires worthless, right, no matter what. How many strikes expire worthless every week? Tons. If you're not taking advantage of that by selling it to somebody else against your long call, I'd say you're missing out on money. I mean, sometimes we might not be right in which call we think is gonna expire worthless, right? There's a balance between, you know, how far out do I wanna sell and how much premium I wanna receive. But, you know, a lot of times you're gonna be making more money more consistently with a spread. All right, enough about my soapbox spiel about spreads versus long calls and long puts. Not saying that long calls and long puts aren't good because they are good, but they are better used for day trading and very, very rapid moves. That is when I would use long calls and long puts and I do do that as well. But most of the time, if I'm swinging anything, I am going to be using a spread because if you're swinging something, you have a lot of overnight risk and, you know, why not? You're gonna have theta burn as well to take advantage of it and sell something to get, make theta be on your site instead of against you, right? So, box over. So, I wanted to pull this up because I just wanted to show you guys the difference between a long put butterfly and a long call butterfly and a minimum stick there. I wanted to make a new tab. So, long call butterfly looks like this. So, you can view it here as a table, but you can also view it as a graph. So, this is at expiration. Before expiration, the profit profile looks very different, right? You gain more towards expiration because for a butterfly play to achieve max profit, you need it to be at this certain price at expiration and that's because you're selling options contracts. You have these two sold here and this is not going to go to zero until the last couple days of the play, right? And so, that's why for a butterfly, you will always see that, let's blow up this chart range a little bit so you can visualize it.  If you've dropped too much, you start losing money. You're really trying to pin it to this peak area here, okay? And you see that the further right you go, the more money you make, even though the price is the same and that's because you're collecting data. So, this is why sometimes playing the time, choosing the right expiration date is also valuable for a play. Not that you don't make money if you play further out, but after a certain point, it's like not really sure I want to play this. There's probably a better strategy out there if I expect a $550 move in one or two days. For example, getting a vertical spread or even long calls, right? If I'm expecting it to move up soon, that butterfly strategy is not the way to go. But finding the right expiration is really important for a butterfly spread. All right, anyways, graph. So, this is what it looks like at expiration. Okay, I'm gonna zoom out again, go along the movie, along the time to expiration so you can see it. So, this is what it looks like at expiration. The break events of this play is $528 and $57185, which is basically your long strikes, your wings, plus or minus your debit paid. That's basically how you get this number. If you've been playing options for a long time, you probably already understand how to do that in your head, in a snap. But $580, so we're gonna look at the call, or sorry, the put butterflies of the same one with the same strike. So, if you notice, net debit is $840. Net debit here is $815. So, it's actually a little bit different. And that's just because sometimes the IV calls versus puts is a little bit different and liquidity is a little bit different on place. I'm gonna switch to bid and ask, just to see if there's any difference there. Yeah, so you see here, the liquidity on the puts is really, really bad. So, a mid and bid and ask is just what you're buying the strike set or what the options calculator is using to assess the price. And if you're doing bid and ask, then it's assuming you're buying at the ask and you're selling these at the bid. And so, that's why there's such a huge difference because puts usually don't have as much liquidity or volume as calls do. Pretty much almost all the time for anything ticker you find, that's pretty much always the case. People like to play calls more than puts, right? I do too, that's just how we're wired, I guess. But that's why you notice that your big difference between bid and ask and bid on puts while you don't notice a difference in calls. $60 difference here and you got like a $300 difference on puts. So, calls has better liquidity. But, you know, we see that they're about the same price.  But I think that's just because the liquidity is so bad on puts. But you see that the profit profile is about the same, right? $201 to $60, $201 to $85, that's just the difference between the debits here, because this one costs a little bit more for the puts. And your break even is, you know, about the same again because the profile is exactly the same, okay? Right? There's no difference. So, just wanted to visually show you guys, I know this is a really, really long rant. All right. But basically, calls puts the same. The only thing that decides whether you should do a call or put it is if your ball, do calls because you want to sell a strike that's out of the money if you're doing puts. That's because you're bearish and you're selling a strike that is below current price. Done with that. Desktop app and I got a question from SR and broke. They're, I don't know if that was from you, but somebody was asking about desktop app or iOS app. They are the same. You can use both of them. So, all construct does have an app on the phone or mobile. That is really, really handy if you do a lot of trading on your phone. So, I know somebody was asking about is this estimation or not? And yes, all of these things are based off of, okay, I'm blanking out now. But it's based off of the formula. I should know what the name of it is. I forgot, but there's a really, really common formula that we use for options pricing.  Okay, Black Scholes model is BSM. So, at least I think it's BSM, but Black Scholes model and that's a model for how options is priced and that is what these options calculator is based off of. It is not a perfect model, but it gets pretty close to the price. The one sticking point about Black Scholes model is that it does not do so well because there's an unknown variable and that's called IV. IV is unknown, okay? IV can change and when IV changes, it changes the options profile. Not expiration because IV is zero at expiration, but if you look at the table here, right? So if I change IV, then you see that the price changes. And IV is something we cannot predict because IV just represents demand, supply and demand for certain options contracts and that is not something that we can predict. But yeah, so this goes back to one of the points of why we use butterflies and that's we use it in high IV environments. And the reason is because when IV is high, butterflies become really cheap and that's because we're selling two strikes, right? So we're collecting more premium on that. So the butterfly spread is cheaper. And then on top of that, when IV is high, usually that means that over time, IV is supposed to drop back down. And if you are within range of your play and IV starts dropping, notice how you achieve max profit much quicker, right? Suddenly if at $550, I'm making $1283 on this play. Whereas if IV was higher or where it is at right now, you'd only be making $358. But suddenly IV dropped, you'd be making more. So this is why we like to play butterflies in high IV environments, okay? They're cheaper to play, cheaper to open, right? And then you make max profit sooner. So that's why we do that. All right, next slide, breaking down the numbers. So I repeated this a lot of times throughout this. So I'm not gonna go through this slide, but this is basically explaining how you get the profit loss thing, right? But I explained this while we were going through the examples earlier, so I won't be going through that again. But I'll have this slide in here if you guys wanna pause the video later to watch it. Crows and cons of butterflies, all right. So primary advantage versus long calls are puts and or vertical debit splits, okay? So it's cheaper to play, right? Why is it cheaper to play? It's cause we're selling two contracts, right? So I know in that Netflix example earlier, remember for that long call, if I bought that 520C for 716 for Netflix, that would cost me $15.80, I closed on Friday. But to play the same butterfly, it would only cost me, what was it, $815 or something like that? So that's almost half the price to play. So it's a very high reward to risk play. And the reason is because we have low risk on butterflies and what risk is, what is risk? I know a lot of people confuse that with like probability. How likely is my play gonna pan out, right? Sure, when we say something is risky, we go like, okay, maybe that's not gonna work. But really what I'm using risk here to mean is how much you are risking on the play. In other words, basically how much the play is costing. Cause with these kinds of plays, your only risk is your debit, how much you put into the play. So in that case of that example, for that Netflix is $815. And if you remember on the calls, $815 to $2,185 is our max profit. So this is like a, I don't know, maybe like a 2.5 to one ratio. I was close, okay, 268%. So that's our max game. Not bad, right? Like I can double to triple my account if I play all the way up to expiration, which may or may not be a good idea. Okay, but that's the potential. There's the potential to make that much. So it was a very high reward to risk play. Primary disadvantage. So with that said, when you have low risk, when a cost play doesn't cost that much money, that also means that it's a low probability play. I don't know how many times I've seen people buy far out of calls for like really, really cheap. Like, oh, you know, it only costs like 50 cents or whatever, right? And I'm like, well, sure, but chances are, you know, that call is gonna expire worthless, right? There's low probability on that play. That's why it's so cheap because all options are priced in, in reality. We're just trying to apply our bias to market to try to get an edge, and that's where we're trying to make the money from. Because in reality, all options are priced based on probability. How likely is this play gonna pay out, right? And that leaves me back to another point. I know I'm back tracking a lot here, but this goes back to Delta. Delta also roughly represents the probability of a play going into money. If your play has a Delta of 16, that means there's a 16% chance, roughly 16% chance, that that play is gonna go into money by expiration. That is what Delta represents too. So if you know, like, some brokers tell you what the expected move is every week for a certain ticker, if you go and find the call that is 16 Delta or 0.16, same thing, and you find a put that is 0.16 Delta, that is what the actual expected move is. Approximately, it's really, really close. So, and what this 0.16, why is that important? It's because if you guys have to study stats or no stats, then you know that 0.16 is gonna be represented by more than one standard deviation move. So plus and minus one standard deviation, that is your 16 Delta, approximately, right? Because once standard deviation is 34% on each side, 34 plus 34 is 68, and then what's left over is 32%, right? 32% is a probability that a move happens outside of one standard deviation, and then you divide that by two because you have both sides below and above the stock price, so that's 16. That's my little stats lesson for today. So it's a low probably play because it's cheap. Limited profit, right? If you took calls on this Netflix play at 5.20, and I don't know, say that it goes to $570, if expiration, this will be worth $50, right? 5.70 minus 5.20 is 50, that's the difference. You're making $50 on this play minus $15.88, so that's, I don't know, $34, $35, right? So that's how much your net profit is. But on this play, I'm capped. I can't even make $3400, which is what the other guy would make if it goes to 5.70. I can only make $2,185 on this play. And if it goes to 5.70, it's even worse because now I owe money because my credit spread is owing money, right? So 5.70 minus 5.50, because I sold these strikes and someone else is making this money, right? 5.70 minus 5.50 is $20. That's how much I owe the other guy. But on the other hand, my debit spread, 5.20 and 5.50, I'm making max profit on this because 5.50 minus 5.20 is 30. So I owe somebody else $20 and somebody else owes me $30. And I make, the value of my play is $1,000. So I make $1,000 minus 815 and I only made $185 versus the other guy who got long calls if Netflix is at 5.70, they would have made $3,000. So that is the limit of a butterfly, right? Still profitable, but not as profitable as calls if things are really bullish. And this is why you use butterflies if you're neutral bullish or neutral bearish. If you're super bullish or something like that, you can do a vertical spread or something else, right? But of course, if you feel confident in being able to pin, like for sure, there's resistance at Netflix at $600 is probably not gonna go over $600. Then why not open a butterfly for that strike, right? Now that's what we're trying to do. We're trying to say, like, okay, on the chart, there's a lot of resistance in this area. I don't think it's gonna pop over this area immediately. Maybe it might pop over after consolidating under 5.50 for a bit and then it might make a run to $600 or something. That's something you're gonna have to assess on the chart. But if you are able to guess, essentially guess, right? Or predict those practices accurately, the butterfly would pay out more than an equivalent, call spread. Okay. Chance of getting assigned earlier is soul strike is in the money, so we mentioned that already. So now we know that it's a low probability play and I like to use an analogy here with the dart board. That's why this dart board is here. Basically with a butterfly, we are trying to pin the price to the short strike. Keep saying that, right? So that pin is this dot right in the middle. What's your chance of hitting that thought? I mean, if you're really skilled, maybe you can hit it 10 out of 10 times, right? But for most people, if you've never played darts before or don't do it regularly and say that you're really far out, you'd be happy if you hit anywhere on this board, right? At least for me. I'd be happy with hitting anywhere on this board. So let's just look at this butterfly. Say that the edge of this dart board is basically where your wings are. Say that this 11 over here is 520C. This six over here is 580, okay? And then this middle strike is 550. And then the other axis is you can just consider it time, right? Because you need to be accurate on time as well because you hit max profit at expiration. So that's my dart board analogy. Now think about it for a second and if the dart board is closer to you, are you more likely to be able to hit that center or are you more likely to be able to hit it if it's further away from you? I think for most people, at least up to a certain point, if it is closer, you're probably more likely to be able to hit the center dot, right? A bullseye or 550C in the case of Netflix than if it was really far away. And so that brings me to a point. I'm gonna shift this over to a neutral bird. Well, I say that 500, 525, 550 for a neutral butterfly. So this play costs $850. I can only make 1,600. All right, so I changed the strike. Notice what happened here. Why is this play more expensive on July 2nd than July 16th? I'm paying $300 more. Why? You know, isn't it normally that when you buy further out, plays get more expensive? Look what's happening. It gets more and more cheap. In fact, if I go all the way out to March 17th, 2023, I didn't even know they had it cost that far out. You get a net credit of $358. They're actually paying you to take this play. I just realized there's something broken here. It's because they don't have those strikes. Let's fix that. Okay, January 23rd, okay? Sorry, January 20th of 2023. So a couple of years from now. You're still getting a net credit, right? $15 net credit. That's your minimum profit. You can't even lose money on this trade if it executes.  But just for visualization purposes, because we're just comparing mids for all of these, as you go further out, it gets cheaper and cheaper.  But basically the further out you go, the more cheap it gets.  But why? And that goes back to my dartboard analogy, right? If I place this dartboard one mile away from you and you're just throwing darts, you're not using a sniper rifle or something, right? You're just throwing darts. How likely are you gonna hit this? Probably little to no chance, right? That's why it's so cheap to play. And on the other hand, if you move the dartboard closer, you get a closer expiration, you are more likely to be able to accurately gauge what the price of Netflix is gonna be in a one-week period over a two-week period. Like if I go out a couple of months, I'm gonna be like, anything can happen in the market. Maybe, I don't know, we go to war or something. Whole stock market crashes. Or maybe, I don't know, we get another big stimulus for banks and they decide to not lower corporate tax rates or something like that instead of raising it. And suddenly the market skyrockets. Anything can happen in those couple of months and this can bring us out of this butterfly range. And that is why it's so much cheaper to play further out on butterflies than to play up close. Okay, so that is my dartboard analogy. Take it as you will. Hopefully that helps explain some things about butterflies to you. The low probability of success, especially to hit the center strike. But you know, most of the time, I'm pretty happy if I can hit anywhere on this dartboard. If I can hit anywhere on this dartboard, I'm making money and if I'm making money, that's all that matters. Don't try to aim for the bull's eye all the time because chances are you're not gonna hit it. And then my other analogy here is on dartboards is, if you make your dartboard bigger, are you more likely to hit it? The answer is probably yes, right? So if we widen these strikes out, the play is probably gonna cost more, right? I didn't even measure out how far these are, but let's just do, I don't know, 450, 520. So how much is that? I want $70, so I need $70 up here, so that's 590. So this is $70 wide butterfly on both sides, or $140 total width. So this plate cost me $4,700. A lot more than what the previous plate cost me, right? Before it was costing me $800, and that was for like a $25 wide spread, 25 on each side. So $800 or however much it was versus $4,700. This is a heck of a lot more expensive, but you know what, your break even is also a lot wider. This is a much more higher probability play, but your profit is less relative to the max loss or the net debit. So the more you put into the play, the less you get out of it in terms of relative profit, but the more probable it is. And that's because your dartboard is bigger, it's easier to hit. How do you wanna play it? I don't know, it's up to you.  I'll tell you in a bit how I play it, but for visualization purposes, I hope this dartboard analogy helped you guys. So wing width, this goes back to that dartboard analogy on how big it is again, right? So you have two components, your debit spread and your credit spread, those are called the wings of the butterfly, right? The short strike is the body of the butterfly. Importance of wing width, again, this is repeating what I just said earlier with that dartboard analogy. A narrow butterfly or a small dartboard has a low probability of success, lower risk, and the reason why risk is lower is because risk is how much money we can lease because it costs less, so that's why it's lower risk. Also lower return, why is it lower return? Because, you know, the chance that you're returning a big number is really small. So it's just expected value, right? Of course, your percent gain is gonna be a lot higher for a smaller and narrower butterfly, but the probability of hitting that is a lot lower, so most of the time you're gonna be, it's gonna be expired and worthless and you're just losing the 50 bucks you threw in a really narrow butterfly or something. Why are butterfly higher probability of success? Higher risk, because it costs more, we're paying, again, in that example, 4,000 bucks versus 800 bucks to make it, you know, $50 wider or something like that. But also higher return, because you have a higher probability of success, higher chance. And so, again, I just asked here what is risk and that's just because I know a lot of people confuse and mix up with being probability of outcomes, but it is in here, I'm using it to represent the amount of money we can lose. That's how much I'm risking, right? Okay, I think this covers this segment of the seminar, so I'm gonna really quickly read up on the chat here and see if I missed any random questions. I know that there's been a lot of questions being asked and I wanna thank everybody who's been answering questions. I noticed double seven answering a lot of questions, Shen Moon's answering a lot of questions. I think Roy's dad is in here as well. But yeah, thanks for answering questions, guys. Uh, somebody's asking about the benefit of butterflies over traditional credit or vertical spread and that's just because it's cheaper, right? It's cheaper. If you're talking about credit spread, that's a little bit different, but you also have a debit portion of it and that actually makes me able to earn more. With that debit spread, I can win more than I would if I had a credit spread, right? So disadvantage of a credit spread in that case is that, you know, for a credit spread, all you can collect is whatever you collect upfront. A debit spread has more potential to make money and with a butterfly, we are offsetting that debit spread cost with a credit spread and that's why I like it. Somebody was asking more expensive or less expensive than buying a single long car. This might have been a while ago, but basically, because I answered this during our presentation, but it is cheaper, right? Butterflies are cheaper to play. Ah, Robin Hood isn't letting you add two calls at 550. Make sure you have advanced options, enable options level three to do these kinds of plays and also after you select all the strikes, you need to customize the ratio of the strikes. I don't wanna get into too much into that because that's more brokerage type stuff. From Frostpeld, Timehawk, can you please give an example of a butterfly play to try out next week? I'll give examples later, demo later on how to do that. And what's optimal to play. All right, I don't think I'm gonna answer most of these questions, the rest of these questions because I will be answering them later. I'll have slides later to answer the questions. So, does change in IV effect butterfly spreads? Yes, we answered that. I think I probably went too far back in the chat because I answered a lot of these questions. Can you do butterflies on a cash account or a margin account? You do need a margin account to do it. How do I identify good tickers to play butterflies? We'll be going over that later. All right, I think there's too many questions in chat. I know I didn't answer everybody, but I will be taking answers, questions and answers at the end if you guys still don't know how things are working out for these butterflies because I still have another five or six slides to go. I think I'm about halfway done. So hopefully the rest of the slides will answer your questions. Thanks for bearing with me, guys. All right, next slide here, butterfly variation. So far, we've just been talking about vanilla butterflies which is a long call or a long put butterfly. So there are other types of butterflies and this is not an all-inclusive list but it's some of the ones I thought were more important or the ones I see more often. We got broken wing butterflies here. I'll be shorting it to BWB but they're also called skip strike butterflies or unbalanced butterflies and that's because one spread, one of the wings, you got your credit spread and your debit spread is larger than the other. When your debit spread is larger than your credit spread for that width, then it's called a debit broken wing butterfly and then when your credit spread is larger than your debit spread, that is what we call a credit broken wing butterfly and that is the traditional broken wing butterfly. Usually when I see people play broken wing butterflies, they are usually trying to play it for a credit and that's the common way of playing it. We do use a lot of debit broken wing butterflies in our Discord dough and that's usually how I am playing broken wing butterflies. Credit is also a totally valid move and I think it's a good way to play it as well but I think most people's accounts are better suited for debit broken wing butterflies because it's easier to understand and manage right now. If you do have larger accounts though, you know, go and read about credit broken wing butterflies. Christmas tree butterfly. So it's similar to the debit skip strike butterfly or the debit broken wing butterfly but what it does is it has an additional credit spread. So it's a one, three, two ratio and I'm gonna have to show you guys this on option strat so you guys can visually see it because I think it's kind of hard to understand just from reading the text. But a Christmas tree butterfly is when you are more bullish or bearish. You want to have more direction on the play while collecting a little bit of extra credit to reduce the cost of that directionality. Same thing with broken wing butterflies is that unlike a regular butterfly, a broken wing butterfly carries some, a little bit more directional protection because by breaking the wings of a butterfly, instead of having it be where we're like a normal butterfly where we're trying to pin it to a certain price and we have that tense in the profit chart, right? If you remember, I'm just gonna show it to you guys. So you have a tent, right? You can only make profit on this butterfly between 497 and 552. It has to be between here. This is our tenant profit. With a broken wing butterfly, you eliminate risk on one side. So I'm just gonna show it to you right now. So for example, right now my credit spread is $70, right? So if I wanted to do a credit spread, then I'm gonna slide make my debit spread smaller and I make the credit spread larger. And okay, I'm at a credit. Great. All right, I'm not saying do this guys, but just for demonstration purposes, right? So 510, 520, that's our debit spread, really small debit spread here and a wide credit spread from 520 to 590. So what this does is that we get a net credit on this play. We play 700, or sorry, we don't pay. We receive $782 for taking this play. And our max loss is now $5,218. This is our additional collateral for the play. And the reason for this is because we got a credit spread running over here, right? So if Netflix goes all the way up to $590 or higher, we're on the hook for $5,218. Technically, it's basically $590 minus 520, $70, that's we owe somebody $70, right? And then we have this debit spread to neutralize some of the costs, but this is only a $10 wide spread. So it's $70, $590 minus 520, and minus this debit spread. So that's $10, so then we get $60. So that means that our max loss is $6,000, but then we have the net credit we receive for opening the play at $782. And then we end up with $5,218. That's how you get this max loss, right? So because your credit spread is so much wider than your shoe. Debit spread, we have the potential to owe money, but we get credit for the play and it's called a call broken wing. And what this does here is you see that we protect ourselves from downside. That means that if you are, maybe you're bearish, you can do this, right? Because that means that if Netflix drops, you collect full max amount of the net credit, $782. That's what this 100% represents here. It's not representing, including the collateral, which is usually how I like to play. I like to use percent max risk. Because in reality, I am out $6,000 on this play minus the credit. Because that's how much I have to keep in reserve in my account if this play goes south. Not saying it will go south, but in case it does. But yeah, so you profit $782 if it goes anywhere past below, right? And then your break even is 537.82. But of course, your ideal, your max profit is always gonna be where you sold the strikes, which is 520. That's where we wanna be. But if you think that maybe the market is gonna go super bearish, but you think like maybe there's support at 520 and you're like, okay, I'm bearish on Netflix. I think it's gonna stop at 520 on 716. So I'm gonna take a Spotify, but I wanna make sure that maybe I think that the market might have potentially just completely break through this support on Netflix. And I wanna protect my sound side, right? Because before, if you were doing the whatever, you would start losing money if Netflix broke down really, really far, right? So to protect yourself from that, you can do this and you get 510, you can do this call broken wing and you protect your downside. So that's all a broken wing does is it protects one side of your trade. On the other hand, you can also play this in a different way. And I wish I made slides on this, but there's so many topics to cover. All right, there's a different way to play this. And that's if you play it out of the money, bullish call broken wing. I don't know if I can do that with this, but I'm just trying to mess around with the numbers here to try to create something that does that same effect. So you can see that I shifted the strikes up because Netflix was at 527.42 at close on Friday. So I say that on 716. I think that Netflix is gonna go to $550, right? But I'm also like, ooh, the market is at all time highs. What if we crash or something or the market decides to pull back and we don't go up to five Netflix drops to 450 or something. And I wanna protect my downside. This is the way to do it. You can use a call broken wing out of the money call broken wing, right? So now that my max profit is still at 550, I gained $1,000 on this play and I collect the $84 credit on this play. My max loss is $2,916 if it's over 590. I'm not gonna go above, right? But if Netflix drops below 540 or it just keeps going down for example, I don't lose on this play. That's because I collected max profit on this credit spread, remember? This credit spread, we're collecting max profit on as long as it's below 550. We don't pay anything to this person that we sold this credit spread to, right? And because we are protected by this credit spread, basically we don't lose money down below. So this is a way to play if you are bullish up to a certain point but wanna protect your downside too. But the downside to this kind of play is that, oh boy, if Netflix is actually really bullish, it's gonna be a little bit painful up here, right? Like once you break over 530 early on in the trade, you start losing money. And then it slowly creeps its way up to 550 by expiration. And that's just because your credit spread is so large. Whereas if you did a normal butterfly spread, 510 would be a regular butterfly, right? You actually have leeway up and above 550, right? Like if it goes above 550, no worries. I can still make a little bit of money as long as it doesn't go too far. And then it slowly narrows the range as you get closer to expiration. And that's just because of the way these short strikes work, right? The dynamics of the Greeks. But basically, with a broken wing butterfly, you are biasing your direction significantly. And the main purpose of it is to collect the credit on the play and to protect one side of the trade so that you're not losing on both sides. Which you do with a regular butterfly, you lose on both sides of the trades. And you just have to pin it. Profit is also higher though on a regular butterfly. But again, going back to probabilities, it's a heck of a lot harder to nail that strike on a low-cost play. So even though the possibility of profits, I mean, not a possibility, there is a possibility of higher profits. The probability of hitting that higher profit is not necessarily there. So that's why a lot of people do broken wing butterflies because it's more probable to get profit, but you may not hit as high of a profit. But at the same time, a lot of times, you could hit the same profit. You just have to assess every single trade, manually figure out what's best for you using what you expect of the price action. That's how you should always play your trades is what you think the price action is gonna be. Do I want to protect myself from downside risk? Do I wanna protect myself from upside risk? Where do I think the stock is gonna stop? How wide do I need to make this to make sure that my play is gonna be profitable within that range? Where support and resistance? Those are the kind of questions you wanna ask yourself before taking a play. All right, I think I went into a little bit more detail on that than I expected to. Christmas tree butterfly. So Christmas tree butterfly is the same thing as this, let me check out my mouse on here. So Christmas tree butterfly is the same as a debit broken wing butterfly, right? Except that you're adding an extra credit spread. So this is what I normally play. I normally like to use regular butterflies which is equal width on the wings or debit broken wing butterflies. So this is the opposite of the credit broken wing butterfly and we're gonna shrink the credit spreads, right? So I'm gonna make it 570, for example. 510, 550, 570. The top wing is about half the size of my bottom wing. And again, I know a lot of people are probably gonna be asking, well, how do you decide how, why to make each strike, right? Again, it's just dependent on one support and resistance areas, right? For choosing the middle strike. And then, how wide do you wanna make these wings? It's again, probability. How comfortable do you feel playing this? If I feel less comfortable playing this, right? Then I might just choose to do a regular butterfly because remember, regular butterflies are cheaper to play. If I shrink this credit spread, I'm gonna be paying more for this trade, right? So this is at 590. Look, it cost me $1,450 to play this. If I move it to 570, it's cost me 1554 to play this. And if I go even further to 560, it's 1651. So that means I'm paying about $100 extra for each increment. This of course depends on the ticker, right? You have to assess for each ticker if it's worth shrinking this or not. How much of a difference? How much am I paying? And how does this affect my bottom line, right? So the more I shrink this debit broken wing butterfly from a regular butterfly as I shrink this credit spread down, the more I pay for the play. But on the other hand, look what happens to our profit chart, right? Do you notice it getting more green as we look to the upside, right? So when you do this, you get more of the vertical debit nature of the play and less of the credit nature of the play. And that's why it looks more and more like a vertical until you go to a true vertical, which is at 550. Because if you're buying and selling, this is basically buying 1,510, selling 1,550. This is the easy way to tell what a vertical spread would look like compared to your butterfly.  So you get a lot more money. If you make a big move sooner on a vertical spread, then you wear the butterfly. And as a hybrid in between, by doing a debit broken wing butterfly, you kind of get the best of both worlds and you also get none, right? That's usually how it works. Can't get everything. You can go in between, but then you're just getting some of a little bit of both, right?  Because if you're playing a vertical, it costs you $1,800, right? This just reduces the cost of the play. And if you're just getting a regular long call butterfly for five, I mean not long call, just a regular long call, it'll cost you $22.68. As though it's all just a balance of how much do I wanna pay, et cetera, et cetera, right? How are you balancing and managing the risk? All right. Okay. I got off an attention, again, Bob was trying to explain Christmas tree butterflies, right? So the Christmas tree butterflies with this debit butterfly here, debit broken wing butterfly, it doesn't say that on option strike because they don't identify what a broken wing butterfly is as a debit. They only know what a credit broken wing butterfly is. So you won't see a say that up there, but with a Christmas tree butterfly, you're skewing your play even more by adding another credit spread. So this just reduces the cost of your play, but you wanna skew your graph like this. Yeah, I think it's probably easier to visualize on the graph, should have done that earlier, but you're still trying to pin it to 550, right? But it makes your play cheaper than if you just did a regular debit butterfly. So let's go back. So I'm going to add one here and subtract one here. So I noticed that the curve changed a little bit, right? It was a little bit more steep before, not steep, more of a, I'm doing it the wrong way, more of a gradient, but basically it tilts your curve more. And this basically makes it a more cheaper way to play a debit call butterfly. But at the same time, if you go above your tall strike of your debit call butterfly, which is a point, because when I play a debit call butterfly, it's when I am bullish on a stock, but I think that there's a chance that it may continue to run. This is what I've been doing all this past week, is I've been playing mostly debit broken wing butterflies because the market is so bullish, but I'm like, I still wanna play butterflies because I wanna limit my risk. So I was playing these broken wing butterflies because I was like, okay, even if it passes, you know, my ideal strike, 550 for example, I would still make money. I just won't make as much, right? You know, I make $496 on display. Not bad, right? I still win. I would make most if it was 550 and that's why I want ideally, but it's okay. That's the price you pay for limiting your risk. But if I did a regular call butterfly, I keep mixing up my terms, if I just did a debit broken wing butterfly, not a Christmas tree butterfly, then, you know, if it passed my point, I make more, $1,349, but it also costs more. So all of these different variations of butterflies is just a matter of balancing. How much do I wanna risk on this play? But what do I think is gonna happen to the stock? Is it gonna break past my expected resistance point? And if so, do I wanna protect myself from that scenario? Or am I more afraid that the market is gonna drop and if I'm more afraid the market is gonna drop, maybe I just go over regular butterfly, right? So that it costs me less, so that if it does break down this way, I lose less money because I put less money into the play. This is how I decide whether I'm going with a broken wing butterfly or a regular butterfly or a Christmas tree butterfly. It's just how directional I am. How do I wanna protect myself from more downside protection or do I wanna protect with more upside protection? And if I am more bullish on the stock, do I want to make sure I make a minimum amount, say I wanna make 100% of my play if it breaks over 550 or if I'm okay making like a couple hundred bucks? That is what you should be using to determine what your strikes are. There is another way to do to assess these things and that is by using the Greeks, okay? So I don't really wanna talk about that in this session. But general rule of thumb is when you're selling a strike to other than using a resistance point, another good way is to look at the delta because remember delta is a probability that these strikes are going into money and I don't want, you don't want your sole strikes to go into money because you wanna collect maximum premium on it, right? So usually the recommended delta for selling strikes is gonna be around 30 delta. Why? Because that's the most well studied delta and people use it a lot and so it's been proven. But another good delta to pick other than 30 deltas or in this case negative 30 deltas because we're shorted is the 16 delta and why? That's just because it's one standard deviation above the current price and so it's most likely going to be expiring worthless. So that's another way you can choose to do butterflies. You can play completely by the Greeks and you can ignore the charts and whatever but I like to use the charts. I also look at the Greeks sometimes too but most of the time I find that if I am basing it off of the charts in reality the delta is actually pretty close to 30 delta actually. Not always, depends on how directional I am. But I prefer to play off of the charts rather than just based off of delta alone. I know there are people who do play off of Greeks alone and that works really, really well as well because you are not trying to predict market movement at that point. You are just strictly playing probability and statistics and over time you will win if you position properly in those kinds of places. I am a different type of player and I try to predict the markets sometimes successfully, sometimes not but when I am right, it pays off big and that's just how I play. No right or wrong way to trade just find a trade style that works for you. All right, enough about Christmas tree butterflies. Iron butterfly, so iron butterfly is you've probably heard of iron condors before. So an iron butterfly is like an iron condor except you are pinning it to one spot instead of a range where you can have max profit. I don't really wanna talk about this too much but it's basically instead of having all calls and all puts you have a bull put credit spread and a bull call credit spread. I don't even know if I wrote that correctly. Basically it's like an iron condor except that instead of having your spreads separate from each other you have the center strikes on the same. So that's really the difference between a butterfly and condors. There are also long condors and stuff like that. We'll go over that in a future seminar. Visualize an option strat, we already did that. So I wanna play debit butterfly spreads and I'm gonna try to catch up with chat real quick. I'm not doing a good job with following up with chat. Can you review how good it would be to play MVI's debit spread? We can go over play examples at the very end and you guys can send me charts or tickers that you wanna learn about or not learn about but get a good setup on. So at the end when we start doing charting feel free to drop tickers that you guys are interested in and wanna see an example of a butterfly on or any other type of play, right? It doesn't have to be just butterflies but that's what we're focusing mainly on for the seminar. Okay. So SNR broke. You're having a little bit of confusion here on having to own shares to sell strikes and with other types of spreads that are defined risk. Okay, defined risk strategies. You can own 100 shares to sell a strike, right? That's totally fine. But in this case, our spread is because we own a 510 call. I am buying a 510 call and I'm selling a 550 call, okay? I don't have to own 100 shares on Netflix because I own a 510 call and that gives me the right to buy 100 shares of Netflix at $510. At any time I can exercise this 510 call to get 100 shares and then I'm selling someone else to write and buy 100 shares at a higher price. So there is no real risk in this trade. I don't need to own 100 shares because I own the right to buy 100 shares and I'm just selling someone else to write to buy that 100 shares. So it's the same thing except the price of that contract is different. So this is a replacement for 100 shares. That's what we're paying the premium for. This is a substitute. Any contract is insurance. It is a substitute for owning 100 shares or being short 100 shares depending on calls or puts and whatnot, right? So that's all it is, right? You don't need to own 100 shares to sell calls or puts or whatever. While you're selling puts, you're saying you're gonna buy 100 shares but that's a story for another time. But yeah, you don't need to own 100 shares to sell calls if you own another call strike. You just need to have, if you're doing a credit spread and you need to own the money to cover the difference between those strikes but if you're a long call, then it doesn't matter. All right, hopefully that explained that question to you. Okay, question. I don't know a lot of people are also misspelling. My name is Timehawk, T-I-M-E-H-A-W-K but that's not that important. From your last three months of play, which one gave you the highest return or max loss and the analysis behind which really helped us? Yes, I'm gonna go through examples later. What'd be interesting in Baba that you played this week? Actually, I am going to go over Baba in a couple slides. So stay tuned for that. That's one of the examples I'm gonna use. We're almost done with the theoreticals, okay? We're about to get into practice and that's hopefully more interesting.  Ham fam, I don't know if that's Hamgo or somebody else but will you show us how to close them? Yes, I will show you guys how to close them. Shed you hedge with in-the-money put. You can hedge however you want. If a play is going up and you wanna protect your butterfly even more, I'm gonna show you guys that actually. So say I'm in a regular butterfly. Netflix again, because it's just easiest to not have to change things, right? So say that I'm in this Netflix 510, 555, 90 call long butterfly, long call butterfly, okay? Say that we are at $540 and now I am afraid. Or say that it's past 550, let's just say that. Say that it is Tuesday, July 6th and we are at $554. So right now I'm up $819, right? This is the perfect sweet spot. If we go across this line and the stock price doesn't move, I continue to gain money. If we move down a little bit, as long as we stay, you know, as long as time keeps passing, sorry, data works on my side and I continue to collect money, right? As long as I stay within this range, I continue to make money. That's good. But let's just say that Netflix looks like it's gonna keep breaking out past 550 because now we're over my middle strike. And if we keep breaking out after a certain point, I'm not gonna be able to make more than $819, right? So if I look at expiration, you know, my cutoff is probably somewhere between 571 and 565, right? That's my break off point from this point. If we break off of that point and we go above that point, then it's no longer worth it to hold the point. This is part of my risk assessment of how I analyze butterflies and whether I actually hold it or sell it, right? So, you know, if I think it's gonna have a bullish move above 570, for example, then I'm gonna make less than what I do now. From 819 it's gonna go down to $400, $500, right? Somewhere like that. So, say that this is still, you know, it's Tuesday, July 6th, I still got time on this butterfly.  What you can do is you can add a contract to the upside. So if you add a 590C, suddenly if tomorrow, say that it's Tuesday, July 6th, tomorrow, Netflix, moons, right? Then you protect your range even more.  Like, if Netflix suddenly decides to moon, you make money. Because basically you're saying that I'm buying another 590 call over here. It's not even buying a regular long call, it's just if you're bullish. But it's just another way to manage your butterfly if you're already in a position, right? So, suddenly, like, I don't think it's gonna remain trapped in here on 550s, but I'm like, maybe it might, and I just wanna protect my upside even more than you can just open another long call to protect that upside. So if you take this away, see what happens, you just go back to being pinned. On the other hand, if you fall, happen to fall in this gap area, you will still lose money, but at least you don't lose as much as you would have otherwise, right? You could have lost $1,454 there, right? So that's how you manage that. I don't usually do this, but it is something I've seen people do before. And the same applies to the downside, you can add a putt or whatever, that's just protection, right? Again, usually I just manage it to play itself and I don't like to add contracts to my spreads. Because usually if that happens, it just means my idea is no longer valid or if I'm afraid of my idea no longer being valid, I should really just cut this position. Like if it's green, like why not take profit? And then you just move on to a new position, right? I'm like, oh, I think it's gonna be more bullish now than I just do another butterfly and I go 550, 600, 650. I just roll it to a different position. There's no reason for me to hold on to this position if I think this idea is no longer valid. But yeah, but I have seen people add strikes, long calls, long puts here and there to help change their strategy, profit profile in order to manage that play. All right, SRN broke, SNR broke, sorry. They had you confused at the beginning. I looked at the challenger account starting with a small amount and making these plays and scratching the head. I was thinking they were like naked calls and didn't realize the bias covered them. No worries, glad that we answered that question with you for spreads. So not nothing that we're doing here or explaining today is naked, right? They're all covered, okay? So they're all covered by a different strike. There's no unlimited risk on either side. So there's nothing to worry about on that. Question on closing, you can close them separately if you want. I'll talk more about that later. Hold on to your questions, guys. I see a lot of questions on how to play these. When we go through actual examples of stuff I did, maybe they'll explain those questions out to you. So I want to close dubbit butterflies. So obviously we want to achieve max profit or as close to as we can possibly get. But remember that dartboard analogy, it's really, really, really hard to hit that bullseye. Not likely to hit it, right? But time and we want the asset price to move to our sole strike. We want time to go to expiration and we want the price to be at our sold strikes to hit max profit. That is our bullseye. The chance of hitting that, not very high. Have I hit it before? Yes, I have. Got really lucky on the Amazon butterfly before. I don't remember how much I made on it, but a couple hundred percent or something like that. It was the perfect pin. Usually that doesn't happen. Usually I just get within a certain range of the butterfly at expiration. I have more on examples later. So same example again with that Netflix butterfly. So for that, in order to make max profit, we can visually see it here too. We want it to be at 550 at expiration because that's our max profit. That gives us $2,546, which is our max profit. If you get anywhere outside of that, you don't make max profit anymore. In fact, not even close to it. And then if time is further out, same thing. So that's why usually on my challenge account, you may have noticed I do a lot of weekly and two weeks out butterflies. It's because I have a better chance of nailing this middle price, middle strike price, because I have dartboard is closer to me, right? I can nail that bullseye much more easily on the shorter term place. And also I'm start making that profit a lot sooner. Because until the last couple of days, Thursday, Friday, maybe even Wednesday, that's when you start really making the big bucks on butterflies. And so that's why I do a lot of weeklies and two weeks out on my challenge account. On my more, my normal primary investment accounts, I don't do that as much, excuse me. I do more further out place and I do like monthly, four to six weeks out is usually when I normally do my butterflies and my risk management for that is a little bit different. I'll explain about that in a bit. So that's right here, when you close it, when playing four to six weeks out, close at 25 to 50% of max profit. Or if you reach 21 days out to expiration or 14 days out to expiration and you are green on the play, that is when I would just be like, close the play, just take the money, roll it out to a new position, okay? This is just risk management here. So this is something that Tasty actually recommends is to close 25 to 50% of max profit. So that's what they do. And 25 to 50% of max profit, okay? This is not to be confused with 25 to 50% gain. This is from max profit. So looking at that here, if we're doing 25 to 50% of max gain, you could close this on day one if Netflix goes to 554. But we're not doing base off of profit loss percent. We are doing it based off of max profit. So max profit is $2,546. 50% of that is $1,200 and 25% of that would be about $600, I don't know, $600 or $50 cat math right now. And this is only two weeks out. So let's just pick a four to six weeks out place. So let's just go to August 20th because that's a monthly call. So if I'm looking for 25 to 50% on this play by 14 to 21 days out, 25% of this is gonna be about 750, 780. Can't really math that out but somewhere around there, right? Half of it is gonna be about 1,560, right? So that 1,560 takes forever to hit. You aren't gonna hit it until the last day. And that's why it says 25 to 50% because this depends on your risk tolerance. So 25% out, it's probably gonna be like $600, $700. You're not even gonna hit that by this expiration. So again, it's just dependent on your risk tolerance. The thing about Tasty's recommendation though of this 25 to 50% is that they are specifically referring to neutral butterflies. They're not talking about where we have our butterflies out of the money like this is. Okay, but usually if you're profitable by 14 days expiration, I just take the play, right? Take it out. If you ever hit 25 to 50% of max profit, I would also take the play, take it out. For me personally, I don't really like to manage my butterflies. Okay, I'll explain a little bit about that in a bit. When playing one or two week out, which is what I'm doing on my challenge account, basically I'm performing risk assessment the whole entire time I'm in the trade. Every single day I'm looking at, what is the price now? Where are we going? If we move across time, am I still profitable? If it moves to my expected amount? If it's not, maybe I should consider taking now, okay? Or when asset price crosses the short strength. So if I am, say playing July 2nd Netflix calls, right, 25% of this would be $600 or 50% would be $1,200, so you can take it any time. Probably on Wednesday, that's when you can exit, right? But if say on Wednesday we are at $550 or maybe that's not a good example, let's not do 550, let's just say we're at $533, $616, okay? And I'm looking across and I'm like, if we hold, I can gain another $150 or we move up, I can gain more money, right? But what if we drop? Yeah, lose. Usually at this point, I'm like, if I look at the chart and it doesn't look that bullish to me, I might consider taking the money off, right? If we are above the strike, maybe I might be like, okay, it's the same risk assessment. I go across time, is this worth it? How much do I have to gain if I just move across time? I'm like, I only make another $30 if we stay at this price. And say my expected move is $10 or something, we see resistance at Netflix at 580 and we see short-term support at 556, for example. And I'm like, okay, chances are higher that I'm gonna lose money than gain money. But if I happen to be at 556 and I see resistance at 560 and I see support at 540, then I'm gonna be like, oh, this is great. Because even if we go all the way down to support, I still make money. And even if we go up to my resistance, I still make money. But if your support and resistance areas on the chart, plus you're in a negative relative to where you are now or you don't gain that much, then maybe it's time to get out of the trend. That's what I'm doing every single day when I'm assessing my butterflies. That's how I decide if I'm gonna hold it or if I'm gonna close it. Yeah. So for these one to two week butterflies, I personally like to hold it to expiration date. Unless, again, if I'm doing my risk assessment and I'm going, it's not worth the risk. The support, current support, short-term support is above where it would be profitable for me or it's only marginally profitable and resistance is way in the red for me or something like that. Or if it's below at 30 CIC resistance at 540 and I'm like, ooh, I don't think we have the chance to break out 540 in two days, right? Chances are, I might make a little bit more money but I see support, next major support at 520. And so I might actually lose money on this trade if I keep holding it. And at that point I'm gonna be like, okay, maybe I need to bail out of the trade, close it, move on to the next trade. So that's really all I'm doing every single day when I'm assessing these short-term butterflies. For long-term butterflies, I just recommend just, you know, if you should close it out early if you can, two to three weeks out is the best and then you just keep rolling those butterflies and you just collect those small profits, right? You're basically just trying to collect premium without having too much volatility. The advantage of doing a further outplay like that is because your range of profitability is so much higher in the first days of the trade where it starts to shrink as you get to expiration. Of course you can also make more money but because you have more range on this trade, for a more conservative and larger account which is what my, you know, permanent investment accounts are, not my challenge account, this isn't a lot better because I can slowly just collect the profits and I have a large range of profitability as a day's pass. So then I might like go like, okay, two weeks out, okay, $460, not bad. I made like 40% on the trade. Let me just close out the trade here and I roll out again to two more weeks out, like two more weeks from here. So I go to like August 6th or August 20th. Right, so that's what I would do for a more conservative account because you're basically just trying to collect premium here and some slight directional bias. Okay, so that's that on that. Also on one of the two weeks also listed here when asset price crosses short strike. So if at any time on Thursday or Friday, if we cross 550, it's time to get out. Chances that you cross that strike again or stay in that area, it's pretty close to none, right? Like just take the money, this is pretty close to bullseye, right? So that's what I would do on the final days. If your asset price crosses your short strike, it's time to close out, take profit, right? Managing losses again. You know, when the trade setup is no longer valid, right? Like, you know, if Netflix breaks down, say 520 and say that 520 is now resistance and it doesn't look good, it looks like it's forming a, I don't know. Let's just say that was a head and shoulders pattern or something on the chart and be like, okay, chances are we just keep going down. My play is no longer valid. Time to bail out while I can still can. So that's one way to do it. Personally, I don't really manage most of my butterflies and the reason for that is because they're limited loss, right? Butterflies are supposed to be cheap plays. This is way cheaper than if I was just playing a long call or if I was just playing a, for example, July 16th, right? July 16th, right, $22. Like, if I was just playing a long call, it cost me $22. If I was just playing a vertical spread, it would still cost me $18 because it's 22.68 minus 470, that's about $18. So it's more expensive than the butterfly. You know, if I wanna skew it, I can skew it, right? It doesn't matter, it's still cheaper. It's cheaper to play a butterfly than other plays. Usually my butterflies are, you know, essentially all those. You know, they expire worthless, they expire worthless. And if, you know, I let it run, I have enough plays that run and I nailed the spot close enough that one or two good plays plays for, you know, five or seven or eight plays, right?  Personally, for me, that's what I do and it works, right? Like my challenge account is proof of that. Three months, 11 winning weeks, one losing week, 45% average gain per week, okay? Like I have tons of losers. Every week I have plays that expire worthless. But you know what? Those cheap plays were so cheap anyways. Compared to the plays that are winning, it's like a drop in the bucket. You know what I mean? Granted, this is just my trade style. This trade style may not work for you. And especially if you have a really, really small account because right now that works for me because my account is starting to get big, it's actually like a moderate size account now. You know, it's 70K. If your account size is like 5K or less, 2K, whatever, maybe even a thousand dollars, then you might wanna manage to play a little bit more closely because you can't afford to take those losses, right? But for me, because most of the time I am able to be correct on my plays, as long as I size inappropriately on my plays, I can take a bunch of losers, let them run, and then sometimes those losers go back into money, right? As long as I have enough time. If they're a shorter-term play, maybe it's not such a good idea. But with shorter-term plays, again, all I'm doing is I'm just assessing every single day the probability of me making more money relative to support and resistance where those areas are at. So for longer-term plays, that's how I manage them. If they're losing, I don't really care about it. I don't mind it too much. I just let it run. It comes back into my play, perfect. If it doesn't, then oh, well, as well. You know, that's, I've had a lot of plays go red, back to green, back to red, back to green, that happens all the time. So it just depends on how much time you have on your play. And that's why further-out butterflies are so cheap. $687 for this butterfly compared to $1,400, right? If I just go a couple more months out. And that's because this play can go down all the way down to 460. And Marcus Raleigh again, and we're back to the 550, and Raleigh some more, goes to 700. And then, I don't know, now that the stock is too high, it needs to pull back and comes back to the 550, right? And it happens to be, you know, in September, and I'm like, okay, I'm just gonna take profit now. You know, something like that. Don't worry about it. If it's a long-term, I usually just let them run. If it's a short-term play, then you should be assessing it on an everyday basis using the method I mentioned earlier. All right. I kinda talked about this already. Depends on risk tolerance, different for everybody. Questions to ask yourself, is the potential reward worth the risk at this current price? If it stays here, am I still gonna make money or am I losing money? What is the expected move of the asset? Is this expected move gonna take me outside of my profitability range from where I currently am at? Or is it gonna bring me more closer into my profitability range or am I still in that range, right? Those are all things that I'm planning to ask yourself. What is max profit, profit at current price? Potential expected move. You can find that out from your broker or you just look for the 16 delta moves, right? That's another easy way to find that out. Charge support, resistance, supply and demand, where are those? Is this gonna be able to pin it within a range of profitability for me? If it's not, probably time to get out. Real life example, okay? Real life example. Shop, oops, I forgot to capitalize SHOP, but Shopify, I had this play close out yesterday actually, right, 625, that was yesterday. So this was 1400, 1500, 1550 long called Butterfly at two days to expiration. So you see on this chart, not chart, image here that it says 2D here and that just means it's two days from expiring. So that's just to show you guys this was on June 23rd, which was Wednesday. So at Wednesday, this play was deep in the money, okay? I paid $1,415 for the play and it was worth $6,790 on Wednesday. At this point, I was really, really not sure. And this price here that you see at the end, this is the price that SHOP was trading at on Wednesday, $1,500. Now, if you look at my strikes, you might notice that this is a debit broken wing butterfly. 1,400, 1,500 sold by 1550. I wanted to pin it to 1,500, this was perfect, okay? It was perfect. And I was like, man, I wish these contracts were expiring today, because if they were expiring today, they would be worth 10K, right? 1,500 minus 1,400, that's $100, right? Times 100, because you multiply your contract pricing by 100 to get the number, that's 10K. So I was off by 3.2K. There was another 3.2K of value, extrinsic value to gain on this play. Actually, it says right here, this is one reason why I like Tasty Works is because it shows you all the number. I had a 94% chance of profitability on this play. And the extrinsic value, this is what the E here means, E is for extrinsic. I had $3,157 left to burn on the play in order to collect my max profit. So you can see all the extrinsic value is all on these old strikes, right? Because I want this to burn. And there's a little bit of extrinsic value on my in the money co-option, not much anymore because it's so deep in the money. And then you got more on your out of the money call that is forming your credit spread wing. So this is just for protection, right? I expect this to completely expire worthless. So this 610 is gone, basically, right? But, you know, that's what you're looking for is a difference here. You have a total value of $3,157 left on the trade if shop stays flat for two more days. And I was like, oh man, I wish it would stay the same but I am not sure it's gonna stay the same. You know, it's so unlikely that stocks would just completely pin to one spot. So, you know, I did a quick risk assessment analysis and we're just gonna pull up the chart for this, okay? So let's switch back here and pull up shop. Shop, so I got shop here, that's, let's look at, I don't know, this is an hourly chart here. So Wednesday, Wednesday was this day right here. This is Friday and this is Thursday. So Wednesday is the 23rd, right? You can see that down there. So on Wednesday the 23rd on shop, this is an hourly chart. See that it pinned itself exactly at $1,500 by the close. I wish that was my expiration but it wasn't. So I was like, okay, there's support here for shop 1,500. You know, I had this line from the previous all-time highs, right? This was a previous all-time highs at 1,499.75 and then I saw a shop, you know, bouncing around this area, kept bouncing off of this 1,500 zone. So I was like, you know, 1,500 is a pretty solid support. I think this is good. So I was like, and now look at my profit and analysis chart, I cannot pull that up anymore because it's already expired. So I can't pull it up using this calculator, right? But you know, usually for a butterfly spreads, if it's further in the money, so for example, if it's above your sole strike, you have a little bit more profitability than if it was below the strike. Before expiration, okay, just a little bit. And then on top of that, I had a debit broken wing butterfly which has more bias to the upside than if I had done a regular butterfly. So I was like, 1,500 looks like a solid support to me. I think it might bounce a little bit but it looks like it wants to consolidate. I thought it was going to do one of those symmetrical triangles and let me just try to draw it for you guys here. So this is what I was looking at on Wednesday, ignore everything on Thursday and Friday because that's, you know, hind site is 2020, right? We always wish we knew what would happen before. Oh, I picked the wrong thing. Bear with me guys here as I draw this stuff. All right, so I was thinking, we were just going to trade in this symmetrical triangle and maybe on Friday, I would be at, you know, five, 10, 15, 10, 1500, something like that. You know, I was thinking that gamble. So I was like, okay, we're probably just going to bounce a little bit but we're probably not going to go over 1520, 1525 or so. And I looked at my problem and I was trying and I'm like, it still looks good because I have, going back here, I had $3,000 of extremes of value to burn, right? Even if it goes up $20, so you minus 20 from here, I still had $1,000 of extra cash to make, right? Just from time decay on these middle strikes. So I was like, hey, why not? So I held it and on Thursday I held it. I forgot to take a picture on Thursday. I probably should have, but I did not take a picture on Thursday and then it was looking gray and then suddenly midday dumped a little bit down on the 1480 or so. My, on Thursday, this was worth about $7,000 still because it was at about 1480 at close. So there was still, it was still within range, right? Cause 70, if it's at $70, what you're doing is you're doing 1470 minus 1,400, which was your long call. All these other options expire worthless at expiration. So you don't have to worry about it. 1470 minus 1,400 is 70. So that means this should be worth $7,000. So I was just at break even right there. I was like, the play was currently worth $7,000. And if it stayed completely flat, it would be, I would, sorry. It was at 1480. So actually I had like about a couple of hundred dollars to spare, but it was so close that I was just like, I am not sure if I should hold this or not. And as I was deciding what to do, I had a business phone call. So I ended up not doing anything about the trade. I just left it on and I didn't worry about it too much cause I was like, I was so deep in the money. I was like, worst case scenario, this tree has a lot of chances that shop drops all the way back down to my original entry of, so I had to go all the way down to 14, 15, 14, 14 in order for me to be break even, right? So I was like, yeah, whatever. I'll just treat it as a lot of, and I didn't worry about it cause I was like, shop has been so strong, market has been so strong recently, maybe it's going to bounce back up and go back up to 1,500. It did not do that, instead it, it did do that for the beginning of the day. So let's look at that on a shorter timeframe. Just so you guys understand what I was thinking about on Friday, yesterday. So we opened up at like 1480 or something like that. I was feeling really, really good cause I was like, oh yeah, it's just going to curve up like this. So then form a confidence, go back to 1,500, you know, sometime in the middle of the day and I can just exit and I'm going to be really, really close to max profit and maybe solve for $8,000 or $8,500, which will be fantastic. That's what I was aiming for. You should, I look for about 80% on expiration date if I am still holding something on expiration date. That's usually what I look for. So it started off grave, opened at 1480, started going up to 1490 and then within 10, 15 minutes it started dumping and it went all the way down to 1460 and it kept dumping. And then I was just feeling really, really bad cause I was like, man, I should have sold these. And then I was like, you know, I don't believe this is dumping too much. It's going to bounce. So I held. So I think at some point in the trade, my butterflies red was worth like $4,000 or something around down here. So I was basically at a net loss of like $2,000 to $3,000.  And this is not my challenge account, by the way, this is just my primary account. I had a couple other call plays expiring that day that were up massive. I had Boba, for example, that was expiring that day and that was up a couple of thousand dollars on that position. So I was like, eh, whatever. You know, like when it's easier to manage my positions when my overall account is green cause I don't get as emotional over things. And this is why it's important to play a lot of plays for small amounts, spread out your plays. My general rule of thumb on my primary investment account is about one to 2% per play. Okay, that's it. No more than that. In fact, you can go even less than that, but I do about one to 2% per play. Okay? And then if you are, for example, my challenge account, I'm much more aggressive on that. I do about 5%, 5% max. And my initial starting is about two to 4%. Right now at 70K, I have about, you know, 20 or so different positions. Maybe that's the exaggeration. It's probably closer to like, oh, 10 to 15, I think. Maybe closer to 15, but I have about 10 to 15 positions and they were all open at about $1,000, $1,500 each. Some of them are worth, you know, three or 4,000 right now. And some of them are worth like, or 500 dollars, right? But they're all expiring at different days. I usually try to spread them out three or four expires per week because that allows me to manage my plays more easily. I cannot have all my plays expiring on the same day. That's too risky. And you cannot manage it, right? You can't manage it.  And then over time, if your strategy is good, if your risk management is good, then it will work out, right? So, but anyways, I'm just explaining why I was able to hold shop and it's because my account was up overall. I had other plays to counteract this downplay. So I was down $2,000 or $3,000 on shop. You know, I won about an hour after market open. So I am on the Pacific time. So you see this is like 710, 720. Market opens at 630 for us. So one hour in, I was down $3,000.  But, you know, I was like, I'm gonna hold on to it because my account is net up. I'm just gonna take this risk because I think that it's oversold.  I saw all, you know, RSI was super low, everything, right? I was like, I'm just gonna hold it and I held it. So I started going up and I saw my account, you know, that particular play go green, red, green, red. It was a little bit frustrating. And I closed it at about 12, 10, 12, 20. I think I closed it around here, about 14, 70. So if I had held to the end, I would have gotten a little bit more juice out of it. But, you know, you never, you can never tell what's gonna happen, right? So I closed out here at about 14, 70 because I thought this was gonna be a resistance area right here from the previous days close. And if you look at extended hours, I think you can see it a little bit more clearly. Like, there's a clear line around this area. So you see this wick over here on this candle. That's about 1480, 1475, 1474, yeah. And then about here, it's like 1477. So I was like, below 1480, there's this solid wall of resistance. I don't think it's gonna pop up over that. So when we got to about 1470 again, I just bailed on the plate. And then basically, you know, I stressed myself for two more days for nothing because you remember on Wednesday, this was $6,790 and I basically sold it for, you know, almost the same amount, right? So was it worth it? I don't know. It was worth it on Thursday. I mean, it was worth it on Wednesday to hold it one more day because you know, I saw, we saw this or I saw this. Sorry. I saw this support at 1,500. So I thought it was gonna bounce. So it was worth it on that day. And in fact, we made more money. If I had sold this anytime here, I would have made more money. Even at the end of the day, at the end of the day, I think I was only up like maybe $250. I could have just sold it. But, you know, I held it for one more day on, Thursday to Friday, I would say it was not worth it to hold it anymore because we were on a downtrend, 1480, we're no longer near my middle strike. Maybe we continued, we had this massive sell-off. This is where it was gonna continue and that's what we did in the morning. We happened to bounce back up too, but this is more luck than anything else, right? So, you know, you just have to analyze the risk and the reward. Is it worth it or not to hold it? I would say that on Thursday was the most ideal time to sell it. I didn't and I ended up, you know, stressing myself for two days over this play. I wasn't that stressed about it actually, but you know, it's still annoying to have to watch over it and babysit the play. And that's something I really wanna do to find the optimal time to sell it, right? So usually Fridays are my day off, so then I can do that, but not that fun to have to watch and babysit like. But yeah, I could have took it out two days earlier for about the same amount of money that I received in the end without having to deal with all this mumbo jumbo. So, you know, that's the example of what I did. Maybe not a really, really ideal example, but it is something that I did. All right, I think some people are asking about the sidebars here, the volume profile visible range. This is called VPVR. You do need a premium version of TrainV to do it, but I think there are some public scripts that people have made for essentially the same thing. All it does is it's a measurement of volume on a different axis in your regular volume. So you know these volume candle bars show how much people are buying here, right? On each of these candles. This is the same thing except it just shows where, what stock price is most likely traded while the regular volume is showing what time was most heavily traded, right? So this is a good way to determine support and resistance levels too. So if I was, you know, shop was dropping or something, I'd be like, yeah, it looks like there's really, really strong support here at $1,000, $1,080. So if shop starts with tracing, I look for support over here. And I mean, even without using this, you can tell just because, look, like you have rejections over here, here and here, bounce here, here, here, here, here. Sure, there was like 100, 200, 120 dollar range, $150 range or so around here, but this is the area where you expect to see shop have support. On a relative to support and resistance, you shouldn't think of them as lines, right? They're just zones, right? They're really zones. Price is never going to be exact. The support and resistance signs I use just because it gives me an idea of around where, should I look for, start looking for support or resistance. Catching up with other questions here. Can you buy multiple contracts for a butterfly play? Yes, you can. You can play as many as you want. And, you know, sometimes I play one set, once sometimes I play multiple sets. It just depends on how much the play costs. If the play costs a lot, then I'm more likely to play only one or two or if the play is really cheap, I might play more. And it doesn't matter how many contracts I'm playing, I am only looking at how much the total cost of the play is. Because I'm trying to size in all my plays roughly in the same area, about one to 2% of my count, max, right? And some plays I small size in less, sometimes. But, you know, try to play a lot of plays, try to keep them all roughly in the same range. I do vary them a little bit based on how confident I am, but usually I try to keep them pretty close to each other, right? Not too far apart from each other because the objective of the play is, you never can completely predict the market. Anything can happen in the market and all we're trying to do is increase our odds of success with charting or, you know, using options to leverage our positions and protect ourselves, things like that, to increase our probability. All right, all right, all right, all right. Next slide here. So how to play butterflies. I'm basically talking about this throughout all the slides earlier, but usually when risk reward, I want to talk about this point. I typically look for a one to two point five before risk reward ratio. That means that if I am risking $1,000 in a play, I want my max profit to be something between $2,500 to $4,000, ideally, okay? This is for a high risk reward account, such as a challenge account that you can monitor and play actively. So that's what I look for on my challenge account. And this is gonna be on one to two week out butterflies. I do also play, you know, four to six week out butterflies on my challenge account, but then the risk reward ratio is a little bit different for that. So it's still around the same though, usually about 2.5. Usually I look for something a little bit higher if it's further out, right? Because usually a further outplay means that it's gonna be cheaper. That's likely a hit. I want to be able to max out that reward if I'm correct. So I want to be able to have a better reward for being correct, for being on a harder to hit play, so to speak. And you know, I don't really expect to hit max profits. Of course, I aim for it. Again, if I am within a certain range near expiration and my price is within a certain range, I will continue to hold that contract because I'm trying to hit that max profit and it's trying to squeeze as much out of play as I can. But if it's no chance of hitting, then I will bail out of the play, you know? That's just the risk assessment that we were talking about earlier. Time to expiration. Again, one or two weeks for short term high risk reward plays 46 weeks out for more stable income plays. When to play out of many directional butterflies, I use that to make cheap directional bets. And then I play in the money butterflies when I'm expecting movement to trade in the current range or the chop. So usually this past week, I've been mostly doing out of the many directional butterflies, but sometimes I like to do where my first leg of the butterfly play is in the money. And then I sell the out of the money play so that I still have some directional bias and then I buy a further out of the money, right? So the reason why I do in the money butterflies is basically when I am not as confident about market movement. So by doing it in the money butterfly, what you are doing is you are lowering your break even price. And what this means is that if I can lower it far enough to below the current price with the asset, that means that as long as Netflix holds above that break even price, I'm making money. So that means I am trading not just one direction, but I can trade two directions. I'm basically saying if Netflix falls a little bit, I can still make money. If Netflix stays flat, I can still make money. And if Netflix goes up, I can still make money. It's just a matter of how much, right? And this is why I really like to use butterflies is because I have the option to play that way. And back in, I don't know, April or whatever. You know, sometime earlier this year, I was trying to do more butterflies and stuff because the market was so choppy. Because the market was so choppy, it was just going back and forth, back and forth and just dropping. Butterflies allowed me to trade these ranges and make a lot of profit without having to be too directional. I still have some directional bias because, you know, even in a range in a channel, for example, Amazon has been in a channel for like an year, right? As trading somewhere between 2,800 or something like that. So you have 3,500 and it just keeps ping-ponging back and forth. It still has a range. I mean, even within a range, it still has a direction. But because it has that range, you're able to take a play in order to basically just profit off of data premium burn on one of the options and get a little bit of directional bias on one of the long options. So this is why I like butterflies because you can play it in a lot of different kinds of market environments. But they are best played when IV is high again. So back a couple of weeks back when we had the meme stocks running, and they're still kind of running right now, some of them anyways, like they, I think, wish had a pop last this past week. I think baby might also have popped a little bit because of earnings report or something like that. I don't really know because I didn't play them this week, but when meme stocks rise up a lot, usually the risk to reward ratio for these plays is really, really good because it's so volatile. The premiums are juiced up and by playing in butterfly, I can make a super wide butterfly and it's still really, really cheap to play. Like I played AMC a couple of weeks ago. Yeah, I don't have that play pulled up right now, but anyways, it makes the play really cheap. You can make a really, really wide butterfly for really cheap when IV is really, really high. So that's that. Have you ever played a zero date to expire a butterfly? That's a question from Sunshine. No, I have never played a zero date to expire a butterfly. I have played a one day to expire a butterfly, but the only reason why I took it was because it was an ER play and I actually have a slide on that later. Thank you, Jungbo for getting the question from YouTube. So we got a question from YouTube viewer. Do you buy contracts in a single order? And if so, how good is Robinhood at filling the orders? Great question. So as you might know, I do use both Robinhood and Tasty Works for trading. Robinhood is my challenge account though. Let's just, to be completely honest, I mean, Robinhood is not really good, the best for fills, they are not known for that. You pay a price or not paying a price, if that makes sense. On top of having your order flow sold, which by the way, Robinhood is not the only one who does this, a lot of brokers do this, but they're most well known for it, right? Because of all the news and stuff. But this has been around for a long, long time and they sell your orders to make money. And in addition to that, your orders get very, very low priority. So you do not always get the best fills and you probably will most of the time never get the best fills, it just doesn't really happen. Which is kind of a little bit shady if you ask me because they're supposed to give you the best fill, right?  I have had much better success getting orders filled at Tasty and even at Below, you know, what I put my limit as. Like that happens pretty often, like put a limit at say $1.50 and I get filled at $1.42 or something like that. That's happened before, you know, it happens. But of course I do pay, you know, a fees for that. So is it worth it? Sure, why not? But you know, is Robinhood that bad either?  It's free, it doesn't cost anything. Basically that difference in price is what you pay for in the contracts, right? Sometimes in really, really illiquid spreads. So like, you know, some spreads, sometimes have really, really wide, are really, really wide between the bid and ask, like a couple of dollars. In those cases, maybe it's better to use a broker where you pay a fee to the best to fill you on those. Robinhood, still okay. I am able to fill out those butterflies in one single order. And that's how I always fill them. I don't usually leg into place. You can leg into place, but usually for butterflies, I do not do that. I just play as one single play at the same time, right? I do, however, leg out of place sometimes. Most of the time I don't, but sometimes there's a reason to. And I have an example of that in a couple of slides. So I'll explain more about that in a bit. Okay, so hopefully that answers your question. Robinhood, not the best, still usable. I like them. They have their issues, of course, but it's still usable as a broker. But don't expect to get the best fills from them. If you do have a really, really large account, I highly encourage you to move to a better broker because you can afford it. If for people with small accounts, and whenever I run a challenge account, I usually start with Robinhood just because there's no fees. And maybe I don't get the best fill. But if you just set a limit in there and you just wait, eventually you will get filled, right? Or you don't get filled. If you don't get filled, then oh well, right? You