80% Win Rate - Broken Wing Butterfly Options Strategy | Steven Liguori | Skillshare

80% Win Rate - Broken Wing Butterfly Options Strategy

Steven Liguori, Teaching is My Passion

80% Win Rate - Broken Wing Butterfly Options Strategy

Steven Liguori, Teaching is My Passion

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12 Lessons (1h 18m)
    • 1. Video 1 Welcome and Overview of Course

      1:29
    • 2. Video 2 What is a Butterfly Spread

      4:23
    • 3. Video 3 Comparing Butterflies with Different Widths

      4:13
    • 4. Video 4 OTM Butterflies

      5:29
    • 5. Video 5 Call Put and Iron Butterflies

      6:47
    • 6. Video 6 The Broken Wing Butterfly

      7:11
    • 7. Video 7 Increasing Your Probability by Shifting the Trade

      8:15
    • 8. Video 8 The High Probability Butterfly

      10:37
    • 9. Video 9 What if I Want No Risk to the Downside

      9:30
    • 10. Video 10 Trade Example AAPL

      8:02
    • 11. Video 11 Trade Example 2 NFLX

      6:39
    • 12. Video 12 Summary and Next Steps

      5:41
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About This Class

Are you looking for an Easy to Manage, High Probability Option Strategy that can generate a steady income?

Introducing the High Probability Broken Wing Butterfly!  A trade that once put on, requires very little trade management. 

In this course, we will explore the Standard Butterfly and learn about it's Risk, Reward and probability of success.  Then, Brace Yourself, as we uncover the details of the High Probability Butterfly Spread which is a Great, Reliable Strategy for Income Traders, and Traders who would rather not have to manage their trades very often. 

While the Ordinary Butterfly Strategy, with its  High Reward, but Low Success Rate may not be an attractive choice for some traders, by making a few modifications we can create a trade that can be an Asset for Any Trader to have in their trading arsenal.  

Meet Your Teacher

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Steven Liguori

Teaching is My Passion

Teacher

A Tale of Two Careers….

 

Steve has been trading Stocks and Options since 1999.  With his passion for teaching, he has been a perfect fit as an Options Coach/Mentor for three Online Trading Education Companies.  The Founder and Options Coach at BlueChipTraderDevelopment.com, Steve is available to answer your questions as well as provide One-on-One Online Personal Coaching Sessions.

Years of Coaching new and experienced Traders has given Steve the understanding of what struggling traders need most, clear explanations of the Processes that will lead them to the Success they are looking for in their Trading.

 

Prior to becoming a Full Time Trader, Steve was and still is an ASE Certified Master Automotive Technician.  He was... See full profile

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Transcripts

1. Video 1 Welcome and Overview of Course: Hello, everyone. My name is Steve Allegory. I've been a stock and options trader for over 17 years, as well as an instructor, coach and mentor for thousands of students. While I love trading, my true passion is teaching with my coaching students. I focus not only on strategies, skills and trade management, but also on the mental side of trading. The key to successful trading is to become more mechanical and less emotional in what you trade, how you manage your trades and how you exit your trades When your trading mechanically you have a plan, and you're just implementing that plan. When you are trading emotionally, oftentimes, fear and greed take over. This can cause you to stay in losing trades too long and take some large losses as well as exit your winners prematurely. In this course on high probability butterfly spreads, we will first discuss the basic butterfly spread, throw in a few variations of location and strike with and finish with a modified butterfly that can provide a high probability of profit with very little trade management required. And of course, there will be some trade examples as well. So let's get started 2. Video 2 What is a Butterfly Spread: in this video, we're going to look at a basic call Butterfly spread using the Thinker Swim Risk graph feature. This example is using December 15th options that have 17 days left. It is $5 wide, and we'll talk a little more about that in a minute. A Call Butterfly is a combination of a called debit spread, and it called credit spread. So let's take a minute to look at the individual parts. Here is a call debit spread in this case were buying the 2 58 Call and selling the to 63 call for a debit of $3.76. If you look over to left, where I've drawn a red box, we can see the potential risk and reward of this trade by hovering on different parts of the picture and reading the values in the box. The Pink Line represents the current day profit and loss, and that will show you what the value of current day would be if Price moved to the level that I'm hovering over The blue line is the expiration, profit and loss what the position would be worth at expiration if Price got to that level. So I can see on this trade that the 3 76 is the cost, which is the maximum risk where the maximum loss that can be had on this trade if price were to move down below 2 58 at expiration and the most I can make on this trade is up here above to 63. Anything higher than 2 63 would allow me to make $124. So that's the call debits print. Now let's look at the call credit spread the other side of the butterfly. So in this case, we're selling the to 63 call and buying the to 68 call to complete the credit spread, and we're receiving a credit of a dollar 40 and the credit spread. The most I could make on this is the dollar. 40 that I'm receiving is the credit and the most. I can lose his $360 if price were to go higher than 2 68 by expiration. So the deputy spread had a max risk of 3 76 and the credit spread has a max risk of 3 60 But when we put them together. The total risk now becomes less because we have too short options at the to 63 strike and price cannot wind up finishing below 2 58 and above to 68 at the same time. So by gaining the extra credit of the two options sold at that to 63 strike, we've lowered the risk on the trade. So now my max risk below 2 58 is $236 and my max risk above to 68 is $236 the most I can make on this trade is somewhere north of $260. If Price were to finish right here in the middle at the to 63 strikes, and if I was to uncheck the two spreads and just check off the butterfly that I built, we would come out with just about the same amount. No notice, it says 2 35 And that's because of the way that they average out the mid prices here when they're giving you the pricing on the options. This platform thinker swim is set to average the spreads and give you the mid price, and we're just off by a penny. If we take 3 76 minus 1 40 it comes out to 2 36 And the way they're averaging out the price for the complete butterfly as one unit is to 35. Now what you wind up getting filled debt is going to depend on the conditions in the market . Sometimes you can do better than the mid price, and sometimes you have to give up a few cents just to get in the trade if you're desperate to get in the trade. So now that we know what the butterfly is, what if we were to compare a $5 wide butterfly to a $3 wide? What would be the difference if we were to use $3 wide instead? What would that make the trade look like? And why would I want to do that? How would it affect the trade? Let's look at that next 3. Video 3 Comparing Butterflies with Different Widths: in this video, we're going to compare the butterfly we were using in the previous video that had $5 between the with of the long and the short strikes. And we're gonna compare it toe one on the left here that has $3 between the long and the short strikes. Now I've set up the Thinker swim platform with some additional features so that we can measure the probability of these trades having success at expiration. And the way that that's done on this platform is you would just take the expiration of the options December 15th. And if you come up to this calendar on the top here, top right, you add one day to that. And if you do that, it will give you the probability of this trade finishing between the breakevens as long as you draw some Priceline's at the to break evens in these pictures. What I've done is I've removed the current price of the stock and I just have lines drawn at the breakevens of the trade here and here for the $3 with one and over here I have the lines drawn at the break evens for the $5 with butterfly and noticed that the $3 wide one has a probability of 26.11% of finishing between the breakevens at expiration and the wider one has a higher probability 33.79%. But as you look at the trades, notice that the higher probability one cost more to 35 as the debit, and you're trying to make approximately 2 60 to 65 where the one that's a little bit narrower. You are trying to make a little bit less 200 but you're also risking less. You're risking, ah, 100 to try and make 200. So some people would look at this and say, Oh, this is a better trade because I'm not risking as much And if it finishes in the center, I have a chance of making twice as much. And that's all well and good. If that's all you're looking for on this side, you're risking $235 to try and make $265. You are getting a little bit more probability here, and the probability is because you're getting a little bit more with. So if This gives me a range of approximately 2 61 2 to 65 as the breakevens. The $5 with butterfly is giving me to 60 33 which is giving me about another 70 cents, 75 cents or so on each side where you're still within the breakevens. And I'm not saying that either one of these trades is a good trade. There are strategies where people will use these types of butterflies as an income trade. But they will also manage the trade if price starts to go outside that area and they'll keep the trade in the flat area of the pink line or the current profit and lost. But for the purposes of this course, I'm just looking for you to see that the probability of a basic butterfly when you put them on $3 wide versus $5 wide. The probability by itself of finishing in the profit zone is not very high. If you're using and at the money butterfly in the next video, we're gonna look at a butterfly that's out of the money, one that maybe you use as a target for where you think prices going. So since the butterfly looks like a net or a butterfly net, where you're trying to capture price falling or expiring in this area here. What if we took this net and put it in a place where we think prices going? And if we were to buy options that were out of the money, of course they would be cheaper and our probability would be lower, but our reward could probably be greater. So in the next video, we'll take a look at a couple out of the money butterflies and see what they look like. 4. Video 4 OTM Butterflies: Welcome back in this video. We're looking at an out of the money butterfly, and what I've done is I've placed a $3 wide butterfly out here at an area around to 68 that it centered around. And that's where I've placed my net where I'm going to try and capture the price of the stock because I think the stock maybe going higher or if I was going to use this as my trading strategy, I would use this when I do think that the market is going higher. So now, with lines that I have on the screen, I have my current price line over here A to 60 to 73 and my two breakevens are shown here, and my probability number is 22.28%. And remember that in order to get this probability number to be valid on this thinker swim platform, you need to set the date one day past the expiration of your options and then set the price slices to the to break evens the expiration breakevens. Which would be where the blue line crosses this zero line here, going across. So once you have that, then this number becomes a valid probability number to give you an idea of what's the chance that the trade will finish, thereby expiration and notice that the probability is lower than we had when we were using the at the money options or the at the money butterfly. One other thing to note here is look at the cost of this butterfly. By buying the butterfly out of the money, we're only paying $42 for each butterfly spread. Now, the drawback to that is we do need price to move prices right here and on the at the money butterfly. If Price didn't move, where it went up a little and then came back to the same location, we could make some money on that trade because of the time decay that goes by on the income trades. In this case, we actually need price to move where we're putting this on as a directional trade where price has to move in the direction we choose. And then if it does move that especially early in the trade, this could then become an income trade similar to the active money butterfly. Once price has gotten into the zone, where you're trying to capture the price at expiration. So this could be a low cost trade to put on to try and grow your account. Or it could be a hedge for some other positions where you pay low cost and you need some extra protection to the upside, perhaps above some of your iron condor trades or some other trades that you have on before we move on. Though I just wanted to show you the very narrow butterfly that you can get for very, very cheap now, you probably wouldn't get filled at six cents. You might have to sacrifice a couple pennies here to get a fill because of the bid. Ask spread of the three different legs of the options that you're trying to get into, especially if the open interest is not that large up a thes higher strikes. You may not be able to get in at the six cents, so you might have to sacrifice a couple pennies to get in. Either way, you're paying a very low cost to get into this trade, which could then make a substantial profit. But the problem is when I get to this trade that 22.28 no longer counts. That was for the $3 wide. So let me come over here to price slices and right click on price slices, and I'm gonna now left click and say, set price licensed to break even at the expiration. And when I do that, it now changes the to break even price slices to be the breakevens of my current position. That's on the screen and notice that the $1 wide with between the strikes for this butterfly is only an 8% probability. So while you're paying a very small amount of money, your chances of it being successful out here are not very high, and you're also paying a substantial amount you're paying. If you're paying a dollar a contract, you're paying $4 in commissions on an $8 tree. Some people say, Well, this is only $8 per spread. Why don't I just do 10 of them? And while that sounds great, if you're paying a dollar per contract, you're paying $40 commissions to put the trade on, and you're paying $80 to get in the trade. And more often than not, more than nine times out of 10. This trade is going to lose money for you. Unless you had some really good reason for putting this on this narrow with this low of a probability, while you could make a substantial amount of money if at expiration price finished inside this net most of the time, it's not an advisable trade to use. As tempting as it may seem, so in the next video, before we get to the high probability butterfly examples that I want to show you, which is the purpose of this course, I just want to show you one more thing about butterflies comparing a call butterfly, a put butterfly and an iron butterfly just so you can see what they look like. 5. Video 5 Call Put and Iron Butterflies: Welcome back in this video, we're gonna look at three different butterflies. The call butterfly, the put butterfly and the iron butterfly. The call butterflies just like it sounds. It's made up of three different legs. You're buying an option, selling two of another option and buying the third option. And they're all using calls. And the same thing with the put butterfly were buying a long put selling to and then buying 1/3 option. That's also a long put. So if you look down here in this example for the three call options that were using were buying the 1 65 call selling two of the 1 70 coal and buying one of the 1 75 call. And the same thing with the put it's the exact same strikes except there puts and notice that the pricing of both options are very similar. The reason there's a few cents difference between these two prices has to do with the way that this think or swim platform averages out the mid price of all the options and comes up with a mid price cost for putting the trade on. Now, if you went to try and get filled on it. You may or may not get 85 cents. You may have to come up to closer to 88 cents, and maybe the 88 cents would work right away for the call option. It's going to depend on market conditions. The third example, The Iron Butterfly actually uses four legs. What we're doing here is on the call side were buying the 1 75 which is the further out option and selling the 1 70 So that's a credit spread. And on the put side, where buying the 1 65 again, the further away option from Price and where selling the 1 70 So in the case of the Iron Butterfly, both the short options are the 1 70 Just like in the call and put Butterfly that you're selling two of the 1 70 here. One of the one seventies is a put, and one of the one seventies is a call. So essentially we're getting the same looking position. But in the Iron Butterflies case, the position is put on for a credit, and to get out of the trade, you have to pay to get out of it. Where in the case of the Call Butterfly and the Put Butterfly. It costs money to get into the trade. And we want this trade either one of these to go up in price so that when we get out of it , we gain money on what we paid for where the iron butterfly, You're receiving a credit and you want to be able to get out of that trade by buying it back for a lower amount. Now let's just look at the amounts comparing just the put butterfly if it costs 85 cents and the most that you can make on the trade is $5 minus what it costs, which is $4 in 15 cents. You could see that this put butterfly the most you could make is $4.15. And on the iron butterfly, that's exactly the credit that you're receiving. So for the Iron Butterfly, the most you could make is $4.15 and the most you could lose, on the other hand, is 85 cents, which is the difference between the 4 15 and the $5. Right now, I have all three of these checked off on the screen and notice how they overlap each other perfectly. I have one contract of each of the three positions, and it's almost a Ziff. You're seeing three identical positions, all superimposed on each other, to make the position just a little bit larger in size. So looking at the max risk right now, it's 2 58 and the max amount that you can make is about $1225 somewhere around there. Now, if we look at these one at a time looking just at the call butterfly, it's an $88 risk, and the most we can make is about 408 And if we go to the next one, looks like the same picture. $85 risk and the most we can make is not for 05 very similar. And then if we go to the 3rd 1 even though we're receiving the credit first on this one, the risk is still the same thing. $85 on the iron butterfly and the most we can make if it finished at expiration right up at the peak, which is very hard to do most of the time on these trades, you're looking to profit on the easy money, which is down in the lower 25%. If you wait on any of these trades as I move toward expiration, notice how the pink line is rising up as time is going by and then it's going to get to a point where the flat ist part of the line. It becomes much narrower where now, if you stay in this position overnight, a couple dollar move to either side could take you from being at a 1 67 profit, and you could give back half of it or more of it if the stock happens to move in a large way later on, where early in the trade, if I go back to where we first started, notice how we have a relatively flat area of the line from, let's say, 1 65 almost all the way out to 1 75 So in the beginning of this trade it's very forgiving. But as you get further and further along, it comes to a point where each trader has to decide how much profit do they want to give back before they exit the trade, like if you had $200 of this profit, it would probably be smarter to take your profit and just move on to the next trade. And for some people, that number might be $100. Maybe they're only trying to get 25% of the money, and then they just move on to the next trade. That's the difference between the three different butterflies and the differences just in the options that are being used. But the actual pictures of all three of them are very similar, almost as if it's the same trade. So I hope that clears up the differences, which are really not much the Trades air really identical, at least as faras. The risk is concerned as we move forward into the next lesson. We're going to start talking about the higher probability trade, which is a version of a broken wing butterfly. But the way it's used is what's creating the high probability. So I'll see you in the next video 6. Video 6 The Broken Wing Butterfly: in this video, we're going to talk about the broken wing butterfly. It's a version of a regular butterfly where you can put the odds in your favor mawr and have a higher percentage of being right on the trade. So let me give you an example. We're going to start by looking right at the money. What you see on the screen is a familiar butterfly that's $2 wide between the strikes, where I'm buying the 1 55 put selling two times as many of the 1 50 threes and then buying the 1 51 in this case, I used 5 10 5 and the total risk on the trade is $120 the most that I could make on this trade is about 860 something dollars. If it finished up in that peak, which we've talked about before, rarely will ever happen. The way we're going to modify this trade is in the case of this particular butterfly. If you were bullish on the stock, you would want to use puts for your butterfly and you set it up by building a basic butterfly, which we have here and then you're just going to change one of the strikes. So what I'm gonna do is instead of buying as my further out option, the 1 51 I'm going to buy the 1 49 So now we have $2 wide between the strikes, the 1 55 and the 1 53 So I bought the 1 55 sold two of the 1 53 But now, since I paid less for the 1 40 nines, I'm winding up where I'm receiving a credit for the overall trade so noticed down here I'm buying this trade to put it on, but I receive a credit for doing it, and that seems a little bit illogical, but that's exactly what happens. But just because you're receiving the credit does not mean there's no risk on the trade. So when we had the regular butterfly where the strikes were equal distant, it was only $120 risk. But now I have risk over here. On the downside, past this break even here of about 1 51 51 area, and the maximum amount that this trade could lose is $825 So to put this type of trade on, you need to be comfortable with the risk amount the maximum amount and have a way of adjusting it so that we're taking the trade off when it gets to a certain level, so that you don't lose that full amount on this straight. But what I want to show you about this is this trade will make money if price stay still, which is nice, and we'll also make some money if price goes up. So if you put this position on on a stock that was in a pullback, and then it started to move higher and you were bullish on the trade and you wanted to have a higher probability than just buying calls now granted, if you buy calls, you have a chance to make a substantially higher amount of money. But if you want a more probable trade to add to your arsenal, where you make some money and even if you're wrong and the trade doesn't go in your favor, if it doesn't go in your direction, you can still profit quite a bit. So let's say you put this trade on how many times if you put a trade on that. You bought calls on where the trade stayed sideways and your calls just lost value. So if you used this trade instead, you would wind up making money, because the time decay of these short options would allow this pink line to rise into the zone. And you could make a few 100 bucks on the trade, perhaps before you take it off. What if Price actually moved higher and just kept running away here and we went up three or $4 at least with this particular butterfly by getting a credit on the trade? When you put it on your able to profit $175 regardless of how high this trade goes, you're limited to the upside gain. But you have a way of making money if the trade stays sideways, toe up or sideways or up a little bit. The problem on this trade is if the trade is completely wrong and goes against you and starts moving in a big way to the downside. The best management type of tactic for this would be tohave an area on the chart where you feel the trade would be wrong. Perhaps there's some support at the 1 51 area or the 1 50 area. And if that support got taken out, maybe you're no longer bullish on this trade. And you're saying, Hey, that trade is wrong In that kind of a situation, you're really not risking the 8 25 you're risking whatever the loss amount would be at this level of wherever that stop area is. So let's say it was 1 51 You're only risking 60 bucks if you used 1 50 is this stop. It would be about 100 to $110 you're giving yourself a chance to make a reasonable amount of money if price stays in this area and a respectable 1 75 even if price goes higher, what you have to do is just make sure you manage it in case prices going down in this direction so that you don't lose a 25 on the street because the probabilities will not play out in your favor. If you consistently lose 8 25 when you lose and you're only trying to make a couple 100 when you win now, before we alter this trade into a higher probability trade. In the next video, I wanted to show you what the probability of this trade is, so I have. My options are January 19th January 19th of 2018 is the expiration. So that means, in order to find an accurate probability, I have to set my date one day past the 19th which I'm doing here. So I have 1 22,018 and then what I want to do is drag this Priceline over to my break even now, because I received a credit on this trade and there's no risk to the upside. There's only one break even so, if I drag that over there, I can now look at this probability here, 56.78 So by putting this straight on, I have a approximately a 57% chance of this trade making money at expiration and a 43% chance that it could wind up losing. But remember, if we have set this up with a strategy where we have a line on the chart, that makes sense to have a stop, it either 1 50 or 1 51 or you know, even 1 49 Whatever. Whatever it is on the set up that you choose when you're deciding if you're putting this trade on, then you wind up where you're risking perhaps $100 to make 1 75 or maybe even a little more . If it stays in this area, maybe you make 23 $400. This is a 55% trade, which I would call a reasonably decent probability, but I wouldn't call it high probability. So in the next video, what we're gonna look at is how we can maneuver this trade around so that we get an even higher probability. And we'll look at what we have to sacrifice in order to get that higher probability. So I'll see you in the next video. 7. Video 7 Increasing Your Probability by Shifting the Trade: in the last video, we looked at the broken wing butterfly and we saw how that we can put the trade on for a credit and that we could get a reasonable probability on in this example. It was about 57% probability of making money at expiration, but we had to risk a certain amount of money 8 25 in this case. But we would also use this trade where we would have some type of line in the sand where the trade would be wrong, perhaps in the 1 51 51 area. And that would be where we would exit. Essentially, we were not risking a 25 to make the profit. We were risking much less. That could be a good strategy by itself. But in this course, what I want to do is show you how we can increase the probability and make a high probability butterfly spread. And we'll look at what we have to sacrifice to get that higher probability. What I have here down the bottom, let me uncheck this 1st 1 I have another butterfly, except it's just a regular $2 wide butterfly. But what I've done is. I've shifted it from being up in this region. I've shifted it to the 1 51 1 49 1 47 So you start with your basic butterfly and I'm still using. January 19 2018 Expiration. Same number of contracts and the butterfly would cost $14 per butterfly spray. Now, when you're doing the butterfly, you have five contracts minus 10 and plus five. If you were buying this trade, it would be $14 per contract. Times five. It wouldn't be times all of these numbers. It's just times five of the spreads that you're putting on. So the price you're seeing is the cost of one of the spreads and the same thing up here. This credit of $35 was what you'd receive for each contract or each butterfly spread that you put on. Now, if I change this further out of the money, put Butterfly into a broken wing butterfly by moving the 1 47 strike further out. So let's say I movinto 1 45 It's now going to give me a credit. 21 cents or $21 per spread, just like the other one did accept the other one gave me 35. So by moving it further away from current price, I'm receiving less credit and the cost or the maximum amount of loss is higher, so there's more risk on the trade. The risk is $895 instead of I believe it was a 25 we had before. So could you put this trade on and have a way of managing this trade where if it got past perhaps the 1 47 level or the 1 48 level, or whatever you decided on the chart was your area, that this trade would be wrong? You could manage it that way. Or you could just put this trade on and say, If it comes past this break even, maybe I'll get out of the trade, and that's going to depend on what you find winds up working for you. When we get to the final scenario of this trade, I'll give you some ideas on what I use for these high probability butterfly spreads. So by moving the trade further out of the money, we've increased our risk and we've lowered the potential gain. If price went all the way up, but we still have a nice sweet spot area, but the sweet spot area is now to the downside. So let's say you were bullish on this stock and you put this trade on even if you were wrong and the stock went the other way. Look, how many dollars of movement? $123456 of movement before you're losing money at expiration now. True. If it moves $6 right away, your position would be down $155 if it got to this level. But notice what happens if you were to set these up where the location where the trade was wrong was inside the butterfly area here, especially early in the trade. As you increment the date forward on this, notice what happens to the pink line. Your trade actually could be profitable. Even when you get near the area of your stop notice how I've gotten up to January 10th and where my stop may have been if we were talking 1 48 is now break. Even so, if you put this trade on where the location of where the trade is wrong is inside the butterfly, your position or your max Los, where you would exit the trade will be smaller and smaller as the trade goes by Now. If the position where the trade was wrong was out here, you'd have to be more careful with that because this pink line is going to drop down here as you get closer to expiration and your amount of risk is gonna wind up increasing the closer you get to expiration. So it's more advisable to have a stop area or a place where the trade is wrong. That is either close enough to the break, even or just inside it. And you may find when you get to the 1 48 area that based on the chart and the amount of time left, you may want to stay in this trade and try and make some of the money in here because if you keep going the next few days, this trade has the potential to make a reasonable profit. And I'm not saying that you should try to capitalize on this money up in this top region because this area is the hardest money to make. You will only get that money, probably on expiration day. So right now I'm on the last day of the trade and there's still several $100 to go for the peak. And the reason that this is so hard to do is because if you were sitting here with a $589 gain, a dollar or two movement in the stock could take all of it back and most people wouldn't want to let it ride. They would just want a pocket that $500 or even 400 or $300 which is why we exit thes trades earlier most of the time. No. Occasionally, if my position is in this area where I have, perhaps from 1 48 to 1 51 where I can make a reasonable amount of money and it may be worth staying in the trade an additional day or two, sometimes I will let it ride. But usually I'll be to the right of the center of the position when that happens, and by trying to do that, I have to be honest with you. You're still risking the chance that you're going to take a 400 or $500 gain and give it back and you're at the mercy of the market when you do that. So unless you had a really good reason to think that the market was going to stay sideways and you were willing to risk several $100 to try and make another 100 or two, then it's best off to just exit the trade and move onto the next one. So let me bring the dates back so that we can look at the probability of the trades will go back to today's date, which is December 4th, and we have our max risk of 8 95 But now and I have my date appear set to one day after expiration January 20th and I'm going to drag this over to the break even so we could see what the probability is of this trade. So now, just by putting this trade on, we're receiving a credit of $21 per contract and for the five contracts we have. If this price goes higher, we will make at least $105 by expiration. And if the price stays near current price or moves up just a little. You have a chance to make even more than that $105 in this range. But the probability of making some profit on this trade by expiration is 71.94% which is a pretty good probability for a trade like this. So you might be asking yourself. Well, how far can we take this? How far away from current price could we go? And how much would this risk need to be where we could still receive a credit for the trade ? And that's what we're gonna look at in the next video, so I'll see you there. 8. Video 8 The High Probability Butterfly: in the last video, we saw that we could get a 72% probability by shifting the broken wing butterfly further out of the money were further away from current price. So let me put current price back. So our current prices back to 1 50 to 81. But what if we took it even further out of the money? How far could we go where we could still get a credit that maybe would make it worth putting the trade on Still, So what I have here down the bottom is the 1 47 1 45 1 43 butterfly, which is just a standard butterfly. So let me uncheck this and we start with our standard butterfly again. But notice we're even further away from Price. The center of this is about $8 almost away from current price. And because of that, it's only a cost of a debit of $9. But remember the break even or the chances of this trade finishing between here and here at expiration? In a prior video we saw that was down in the 20% range and sometimes even lower. If we make this into a broken wing butterflies. We're going to take that 1 43 strike and we're gonna move it out toe 1 41 And now we've created a broken wing butterfly that's even further away from Price. And we're receiving a 12 cent credit and my break even is almost $10 away from current price. So this is giving us an awful lot of room. But what are we losing out on because of that extra room? So let's take a look. I have a max risk over here of $940 now, so it increased from 8 95 to 9 40 so my risk went up. Or the absolute risk, at least. And my credit is $12. So that means for five contracts, the most that I can make if price launches to the upside is $12 per contract. So a total of $60 Now the $60 If you're putting these trades on with all puts here in order to create this trade, if price does go to the upside, there is no cost to get out of the trade because all of the puts were gonna expire because they'll all be out of the money. And that was the case in any of thes if Price launched far enough to the upside. In the case of even the at the money one, if it went past 1 55 and worked its way up here to 1 57 1 58 1 60 you just let this expire and you take whatever that profit is at expiration. But if the trade winds up being in this zone, then often times it's better to take the trade off because the Pink line will actually go above the blue line in this area close to expiration. And if it started to move up later in the tree, you would actually be better taking the trade off for a higher profit than that $60 in this case, then you would by letting it expire at 60. My point is, if price does move higher on the trade, you don't have to close the trade. The puts will be out of the money, and they'll just expire worthless. Let's look at what the probability is of this trade that we've moved it even further out. So if I bring this all the way out to the break even now and I just make sure I have My expiration is January 19. I have my date set one day past the 19th which is the 20th. And now I have a trade where before we had a 72% chance. Now we're seeing that on this trade. There's an 84% chance that price is gonna finish to the right of the break, even at expiration. Now, that doesn't mean it can't wander in here and then come back. All it means is 84% chance that it'll finish to the right at expiration. The problem with this trade is for some people, this credit is too small. But if you're doing this trade, if you're doing the trade this far away, you can actually put this type of a trade on in the direction of the current price. Where the first couple we were looking at, we were betting that the trade wanted to go the other way or we were bullish on the trade. But if I have current price up here, it won 53 maybe I have an expectation that price could move five or six or seven or $8 to the downside. As I look at the chart, I see a lot of support at those areas on the chart. Then I might put this further out trade on trying to capitalize on Price, actually continuing in the downside direction and trying to get some of the money in this region of the risk picture. And if I'm wrong and the trade goes the other way, then I'm gonna make 60 bucks anyway, less the commissions for putting the trade on. And if I'm wrong and the trade goes the other way, it won't cost me anything to get out of the trade. So in this case, let's say it costs me $20 to get in the trade. The trade would expire worthless, and I would profit 60 bucks on the trade for being wrong, while 60 bucks minus the 20 would be 40 bucks total. This trade, when you put it further out of the money, you can actually use it often times in the direction of the move, and you'll just need to have a line in the sand somewhere out here, where if it does take out a certain level where Let's say you had support in areas of 1 47 1 48 and perhaps 1 44 1 45 And you're saying to yourself, Look, I'm not gonna let this lose more than a couple $100 to put this trade on, and I'm willing to make $60 if I'm right and I'm willing to try to make a few $100. If I get my forecast right, it actually does come down and bounce off this support area, and maybe I make a couple $100 here. But you don't ever want this trade to go past here where you're giving up $940. Because this strategy, if you're only going to make, let's say you're making 60 or 100 or $200 depending on where you position your broken wing butterfly, you don't want to give up this full amount. So you have to do it in a way where you're comfortable with where the location of this break even is compared to a chart toe where you would want to exit if it got past that level, or you would figure that the trade would be wrong if it passed that level. So having an 84% trade, where if you're wrong on your forecast, you can still make money. And if you're right on your forecast, you can make a reasonable amount of money. And if the market just goes crazy to the downside, where you need to take an exit, you have a controlled amount that you're willing to risk of, Let's say $200 or 2 50 and if your exit area is inside the web of the butterfly or inside the Net area. Then again, as time goes by, you're Max Los actually keeps getting better and better. So notice. As this trade goes by, you can make more than $60 even if the trade jumps back only a few dollars. So if we got back to 1 49 or 1 48 this could be 100 to $150 trade in this region. And if you got in this area, maybe you would draw a line in the sand over here 1 45 and perhaps at 1 50 And if it passed that level, maybe you would exit the trade because if Europe here in 110 $120 you don't necessarily want to just take 60. You'd want to take a least 120. But if you're trade is over in this region, as you get closer to expiration, then you have a chance each day to decide if it's worth staying in the trade, perhaps from 1 44 toe. 1 48 Maybe you stay in one more day, especially if you're in this 1 46 area. And it's all up to the individual trader. How much of this profit are you willing to risk to try to make a little more? And for some traders, the answer might be none of it if you were there with $264 that's where you thought that this trade was gonna be a that time. Some people would just take this trade off because they received 25% of the max profit and they will just exit the trade and reload and put on another trade for next time. So this broken wing butterfly trade is very versatile, depending on where you shift the position to. If your chart shows you an area of support that is good enough for you further up. You can get a larger credit and have a less of a probability. Or you can even put this on in the direction of the move and try to capture the prophet here. If you're right about the move and even if you're wrong about the move, you can still make a little money or at least cover the cost of the trade. The key to any strategy and this is no exception is to have an exit plan if the trade goes past a certain level that you define before you put the trade on because you never wanna have this trade be a full loss because it would take too many trades 345 trades, perhaps to make up the difference of trying to get a loss of $940 that's just not a way to run a business. So what you're doing is you're taking either this small amount of money 60 to $100 in here for maybe 100 or $200 over here. And if price goes past this level, then you're looking for an exit because you don't want to risk more than, let's say, 100 or $200 to put this trade. I'm And if you have an 84% probability on this trade, it would be OK to risk $200 to make 100 or 150 because most of the time you're winning and you can decide how much you want to risk and how you want to set your trade up based on your own personal preferences and see what works for you. The best thing you can do is put on a series of similar trades, and let's say you do 10 of them and see how you're doing, and then maybe adjust the criteria a little and see if you can improve your record. And that's how you get better and better at this and you make more and more money in your account grows. So in the next video, we'll take a quick look at what we can do to have no risk to the downside instead of no risk to the upside. Can we take advantage of this same type trade, but give us a way of making money without having risk to the downside? So I'll see you in the next video 9. Video 9 What if I Want No Risk to the Downside: In the last video, we showed how we can get a very high probability of success using the broken wing butterfly . In the example, we dragged price all the way out to the break even and saw that we had about an 84% probability of being right on this tray. And the drawback was that the credit was a little bit smaller. What if you think the markets a little bit near the highest now, since the market's been going up for quite some time and you would rather have your protection to the downside instead of your protection to the upside? Could we put this trade on toe where the broken wing butterfly is on this side and we have no risk to the downside and our risk would be to the upside and the answer is yes. And the way you do that is you do it with calls and you just structure the trade on this side of the price. So let's put price back where it belongs and let's uncheck the put butterfly. And over here I've created a call butterfly where I've used the 1 54 1 56 and the 1 58 strikes. And again, I'm doing five contracts, and in this case it's a $26 debit per spread. But to make it into a broken wing butterfly, I would need to move the furthest out option. Now, when we were doing the put side, it was the lower number. But since now we're doing the call side, the further out of the money option, we're gonna move out to the 1 60 So we're going to use the 1 60 instead of the 1 58 And you can experiment just moving toe 1 59 instead of 1 60 see if you get the structure, the right credit and the risk that you want. You could try $3 wide butterflies or $1 wide butterflies. Each one of them will give you a slightly different picture, and you decide which risk reward is best for you. So that your most comfortable with the trade in this course I've tried to stay consistent so that we stayed with $2 wide, and then I would increase the strike with by an additional $2. So as I make this into a broken wing butterfly now notice how I have no risk to the downside and the potential to make $85 here. I have a maximum risk over here of $915 and the one drawback that I see is that we're a little bit close to current price. And if you remember, we were getting a much higher credit when we were this close to current price when we were doing it on the put side. While this could be a good trade, it may not give you enough room if the market still hasn't found a top, and you may not like the risk reward because maybe you feel that the market has the capability of getting all the way up to 1 60 now before we move on, let me just see what the probability of this trade is. And if I move that over here, it's showing that we have a 71% chance probability. But we're not comfortable that we have enough distance away from current price because the market has been on a tear lately. So let's change the strikes and move them. Let's move them out to where we're trying to get the Let's say the 1 56 will change this to 1 56 and then we'll make this the 1 58 and we'll make this the 1 62 So now this probability is higher. Let me drag this out to see what our probability is, and we're getting up near 77%. Not as good as we were getting on the downside, but we're still getting a respectable probability of success here. The problem with this trade is our credit is already down to only $3 per contract. So this could be a good trade if you thought price was going to move higher and you wanted to play this to see if you could capture money in this region. I prefer to try and get a little bit more credit so that if you're wrong on the trade and the trade goes the other way or the trade just goes sideways, you get a little bit more for your money because you're waiting several weeks for this trade to produce something. And while it's nice that you didn't lose any money, if the trade went the other way, or if the trade stayed still, I'd like to have Perhaps, you know, $5250 on this size trade so that I get something for being in it. So it is a little trickier to get more credit on the upside, but that doesn't mean that you can't try to get it. One of the things that you can do is you can structure the trade that you want. And then you could say, OK, what's gonna happen to this? Trade of price moved up a dollar. Let me put price backward. Belongs for a second. If you look over here, this is showing that there's a 25 Delta and if I have a 25 Delta for five contracts, that means that Delta would be If I did one contract, it would be about four or five. Let me just move this down toe one contract notice how it's for 83. If the price of this spread would move up by about five cents, so I maybe would get an eight cent credit. If the price of the stock moved up a dollar, then maybe I could put this trade on and try to get let's say intraday. I'm looking for the price to maybe go up another dollar or two before it reverses. And I see that there's Friar highs up. Maybe it won 55 or 1 56 or even. Maybe there's another resistance level up at 1 57 or 1 58 So I'm okay with Price moving up a little higher. But then I think prices going to go down. Could I put this trade on and try and get a higher credit? And I'm using this Delta value to decide how much credit I should try and get. So if I thought maybe intraday, the price would move up a dollar or it may be a little more than a dollar, maybe I structure this trade and put it in for a 10 cent credit and just see if I get filled and I would bring it back to five contracts, then maybe I have at least a chance to make 50 bucks if this trade goes my way. And if you wanted to gamble even further and say that maybe it would go up a couple dollars , maybe you would be able to receive 15 or 20 cent credit and the worst that can happen is you don't get Phil. If Price actually stays where it is or goes lower or never reaches the 15 cent credit, there's no harm there. You're just not getting filled on the trade. It will increase the amount of money that you make on each trade by waiting for a higher credit. But what you'll have is you'll have less trades that Phil. Sometimes people will put this strategy on where they only want to get filled at a certain price that they're looking for. And if they get that price than the trade goes in and it fills, and each day they structure the trade again and put out the price that they feel that is a fair price. If price were to move a little bit higher that day, and if they get filled great, and if they don't get filled, that's great, too. This strategy is very versatile. It could be used on either side of the trade and it can even be used on both sides of the trade. You could put the trade on when prices appear, and maybe you put the call side on first and then as price starts to move the other way. If you see a support region on the other side, you could add the other side of the trade, which would then increase the credit potential in the middle. Now, this is gonna lower the probability slightly, because once you put to break evens on the trade, then it's not gonna be up in the eighties anymore. But you'll still get a respectable amount if I set the price slices to the expiration break . Even if I was able to receive 15 cents on this trade and then get 12 cents on the put side , then my probability would be it 62%. And it's something where maybe you would want to do that, where you have an opportunity to make more money on either side of the trade. So that's also a viable way to use the broken wing butterfly where you do it on both sides Most of the time. When I'm doing it, I put it on the one side because it's a trade that you can put on and leave alone and set an alert on one side. You're most of the time you don't have to touch the trade and any time that you put something on both sides, then if price starts to trend in either direction, you have some concern where maybe it'll go past your your stop on that side. So it does lower the probability a little. But it's something to consider, especially if you think the market's exhausted and going to go sideways. You could actually put both sides on at the same time, as long as you can get a small credit for each one of them. So in the next video, we're gonna look at a case study where we'll look at a chart and try and decide what would be the price points where we would want to make sure that we were covered for and where our exit would be. So we'll do this with the stock symbol Apple A P L. And we'll see if we can find an area of the chart that would make a structure our trade toe where it would give us the most benefit. So I'll see you in the next video 10. Video 10 Trade Example AAPL: in this video, we're gonna look at setting up a trade using current market data. I'm looking at Apple and on this daily chart, it looks like we've moved into a downtrend. Now, we made a lower high here, and we've made a lower low compared to this low. And perhaps we've just bounced up a little and we're going to come down even further now, while this could be a better trade if you waited a little while until it did actually come down a little further because then you could structure your broken wing butterfly even further down for this example, we're gonna look at how we would structure it with the current market. As I look at these different support levels that I put on here, I've just put lines on here. The last time that we came down to this level around 1 67 34 Notice on this day how intraday it came down here, touched this level and it raced away from that level and came all the way back up to close up near 1 69 and change, then the same thing at this 1 66 level. Notice how price when it hit there. There were a lot of buyers down here that brought the price all the way back up intraday. And even if I come down to this 1 61 level, this was an area where there was a substantial amount of buyers that allowed this to break out past this prior high. That sent this stock Apple on its move to the current new highs that it made back a few weeks ago. So by using this information from the chart, if I could structure a butterfly where the short strikes or let's say the one sixties, that should give me a way to capture even if Apple was to move down, maybe it would bounce around and stay in this 1 61 toe, 1 66 area, or work its way down over time and give me a way to make you know a reasonable profit on that trade. So now let's go over to the analyzer and see what we can get. We know we're looking toe, have the short strikes be about the 1 60 level and let's see what we can get now, the first trade I have built. I used January 19th options, and they were 46 days out. But the problem I found was that the strikes were $5 wide there. And while this could be in okay, trade the problem with $5 wide, it's you have a much larger risk for this size position. And if you are $5 wide, it's much harder to get a reasonable credit on the trade. Now. The good news is you do get a much taller profit peek at that 1 60 level. Then you were getting on some of the other trades that we were looking at. If you thought that the price was going to come down into that 1 61 toe, 1 66 area, you could consider putting this trade on. But this is definitely not a trade for a beginner using a broken wing butterfly strategy, because this Max Los amount is too much for most people to handle. Compared to the credit that you're getting here, which is very tiny, it's barely covering the commission costs. So what I did was I moved to December 29th options, and I tried to center around the 1 60 strike there and in the December 29th options, the 2 50 wide strikes were available. So using the 2 50 wide, I was ableto get a current price of about 10 cents for the credit now doing five contracts . This would make the risk B 1200 which is much better than the prior example, and my credit is 50 bucks. While it's not that exciting, I'm putting this trade on, and I'm bearish on Apple because it just created a downtrend on the daily chart. And I feel that it may come down in this area where maybe I can profit in this region between, Let's say, 1 61 65 So if you're thinking is along with what I'm thinking, then this could be a good trade to try and capitalize and make a few $100 in here. But the question you have to ask yourself is, where would this trade be wrong? And where would I no longer want to be in it? So let's just go back to the chart for a second. So what if we were toe take out, Let's say 1 59 here and fill this gap and come down in here 1 59 1 58 area. If we came down that far, would that be where I want to exit? And with the amount of the loss at that area be good enough for me to want to put this trade on based on the credit I'm receiving and based on where? I think that the trade is going to go to this 1 61 65 area. So let's take a look at the picture again. And if I look at where 1 57 is 1 57 1 58 we're looking at about a 250 to $300 risk here. 1 58 is just under 301 57. Your over 300 AM I willing to risk $300 on this bet where I may only make $50? So let's just look at the probability for a second and let me move this out to the break even and notice it's showing 79. But what's wrong with this picture? I still have my date for January 19 so I need to bring this date back 2 December 30th which would be one day after December 29th which are the options I'm currently using. So now this trade is an 87% trade, which is really good. But what if I'm wrong? There's still that percent chance where you have to account for what if I'm wrong. So where would I want to exit this trade? And would I be willing to exit down here at a $300 loss or if it happened early in the trade, would I? Maybe not want to be in this trade anymore? Pest Somewhere around the 2 50 more. Now remember, you do feel that prices going in this area on this trade, so it may be worth staying in the trade a little bit and risking that 300 because you're really trying to make a few 100 in here. So it's like you're risking 300 to perhaps try and make two or 300 you have a high probability that the trade will be successful. And if you're wrong on the direction of price goes higher, you still get 50 bucks, which covers your commission costs and maybe gets you a nice lunch. The other thing you could do is you could put this trade on and try and get a better price . If the market was to go down over the next couple days, let's say Apple dropped a few dollars. Would that increase this credit to maybe 15 or 20 cents? So could I put this trade on and try and get filled at 20 cents? What does that do to my risk reward? It now makes my credit be $100 over here and let me fix my break. Even here, I'm getting my 87% trade. And what's the amount of my loss at that 1 58 level? Now it's only to 29 at 1 57 it's to 65. If you were to put this trade on each day at a price slightly better than the current market, if intraday Apple was to go down a couple dollars, that would increase the amount of credit that you would receive on this. And maybe you get Phil. So where the first trade getting a 10 cent credit maybe doesn't meet your risk reward. You could still try this trade and put it on for a 20 cent credit and see if you get filled , and if you do, then it becomes a trade that you like. So in the next video, we'll look at one more example in Netflix and see if we can find a similar type trade that would meet the same qualifications. So I'll see you in the next video. 11. Video 11 Trade Example 2 NFLX: in this video. We're gonna look at another trade example this time in Netflix and I've drawn some support lines on the chart again. Prior areas were price bounced off of and there were buyers present. So I have one area at 1 76 50 or so. I have another area down here at 1 71 48 where we broke out past this high over here. And then I have the support where we double bottomed before we launch to the upside back here, it's a 11 65 10. So, ideally, if I could structure a trade where Netflix is pulling back and I feel that there is a chance that it will take some time to get down into this area and maybe it will finish at expiration in January down in this region, it may be worth putting on a broken wing butterfly if my short strike could be around that 1 65 area. So let's go over to the analyzer and see if we can build a trade that will take advantage of what we see here on the chart. So I've already built for January 19 the 1 71 65 because 1 65 was the level that I wanted to sell the short strikes around. And then 1 55 is my further out long option and notice how these air $5 wide, just like in the case of Apple. But I couldn't get a good enough credit. But in the case of Netflix, I'm getting a reasonable credit 43 cents per contract, even though they're $5 wide. Now, my absolute risk is up here a 22 85. But my max profit is also quite respectable of over 2600. But to compare this trade to the apple trade, where our risk was closer to $1000 what I'm gonna do is I'm just gonna bring the contract size down to two. So this way we're risking approximately an absolute risk of 900 the credit where receiving is two times the $43 or $86 and we do have a chance if Netflix finished at that 1 65 strike of making up near $1000. Although realistically we would exit this trade somewhere in this region. Maybe 234 $500 game as I look at this trade, where would the trade be wrong? Because, remember, we don't want to risk $914 to make $86 for a chance of making a few $100. We want our risk to be a smaller amount. Now. If I come over here to, let's say 1 60 this would be a risk of approximately 2 55 And let's go back to the chart and see where that 1 60 area is. If I put a line on the chart near 1 60 that's right around there. So let's say if we took out the 1 65 10 area and worked our way down toward 1 60 then I would not feel as comfortable about this trade anymore because there was some support here from this prior high and there was the double bottom where buyers had stepped in. So if we take out this level in a big way and start moving towards the 1 60 level, I think I would want to be out of this train and that's where I would consider the trade wrong. So if I go back to my risk picture that 1 60 area is at about a loss of 2 45 So am I willing to risk to 45 to try to make 234 $500 if I'm right and Netflix does keep going down and bounce around in this area, and if I'm wrong, I just make the $86 less commissions, and in this case, maybe it's $8 in commissions. This looks like a reasonably good trade, but what you have to remember when you're doing this with stocks is there can always be an accounting fraud announcement. You wouldn't want to put this on through an earnings announcement, where the possibility of a 10 or $20 move in the stop could happen overnight and put you way down here in an area where you don't want to be. So look over the chart and decide. Is this a stock that I'm comfortable trading, and I don't feel that it's likely to have a large move now for me? I'd be more comfortable with Apple than I would with Netflix, but it's still a matter of personal preference for each person, and I actually like this Netflix trade better than the apple trade, even though I do feel Netflix has a larger chance of falling out of bed and going way down because just think of it. What if Netflix becomes, at some point like Blockbuster and there's no longer a need for it? And perhaps a new type of service comes out and people no longer want Netflix, they'll they'll go down and fall like a brick, and you won't be able to get out of the way if it started to fall because nobody's interested anymore. So there's always that chance that that can happen, and we never know when that's gonna happen. And while that could happen with Apple is, well, I just think it's less likely to happen with Apple. But that's my personal opinion. That doesn't mean I'm right in that area. It's just what I'm using to bias the way I'm structuring the trade and making myself feel comfortable with what I'm doing. So as far as the apple and the Netflix trades that I've shown you for the apple trade in the last video, I would want to get a better credit, like I suggested, where you try to get a better price and in the Netflix trade, you could put this in and try and get perhaps 60 or 70 cents and see if you could get it, or maybe just even 50 cents. But even the 43 cent credit, based on where the 1 60 would give me a risk of $250. I'm happy with this trade the way it is right now. That doesn't mean it's gonna make money for me, but I like the set up. I like that I have support in key areas, and I like the risk of 2 50 for an opportunity to make a substantial amount over here. And even if I'm wrong, I make $86. And what's the probability on this trade? Let's drag over here. The probability on this trade is pretty close to 80% in the next. Video will sum up what we've learned in the course, and I'll give you an example of how you can monitor this trade even when you're not watching the market. So I'll see you in the next video 12. Video 12 Summary and Next Steps: I hope you found this course to be beneficial and feel as I do that the broken wing butterflies strategy can be a great type of trade to add to your trading arsenal. We did talk about using this trade closer to the money when you're playing it to go in the opposite direction. But you can also use it further out of the money in a high probability structure where you're playing it to go actually, in the direction of the current market. One word of caution I would give you is to not do this trade in too large of a size just because the probability looking at this Netflix trade, what if I went up to 10 contracts because you wanted to say, all right, I could make $430 look, I have a high percentage chance that this is gonna work. You know, I want to make $1000. Maybe I'll bring this up to 20 contracts. So now I can make $860 because most of the time Netflix is not gonna go down that far. So it looks like easy money in here because I have a high probability. Let's say it's close to 80% like we mentioned in the prior video, so I have close to an 80% chance. But the drawback is you have to plan your trade as if there's the possibility that you could lose and something really bad could happen. And you can't have the absolute risk on the trade B'more than you're comfortable with losing in anyone trade. So if I was to bring this up to 20 contracts, notice that my absolute risk is up here over $9000 even my loss amount if I was going to use this 1 60 level is $2500. So true, I have the potential to make 5000 or 3000 or $2000 in here. But if you're not comfortable with this, as price starts to go down here, even when it's at 1 70 your positions down $1100. So if you're trying to do this on a $10,000 account, you're gonna be freaking out when it gets here, even though this is where you wanted it to go. So make sure you learn this strategy by doing it in a SIM account were trading in a very small size that you're comfortable with. Even if you did one contract, then the worst that could happen is you lose $457 you're getting the experience and the mechanics of what this trade and strategy is like so that you can then be comfortable with it and scale up to whatever level you can remain comfortable at. One way to keep track of where the position is intraday. If you're working or you're on vacation or whatever you're doing, you can set up alerts on this where if I go to my chart and I right click on the chart, I come down here to create alert. Let's say I wanted to set a couple of alerts, maybe one at 1 70 Maybe I want a second alert if it gets toe 1 65 just so I'm aware of it. In this way, I get an email or a text notification when prices at those levels and let me just make sure on 1 65 I did have at or below. So that's good. And then maybe I want one additional one that we will set at 1 60 at or below. So then what's gonna happen is if price does come down to these levels, I'll get a text or an email, depending on how you configured your alert system for your broker and you'll get a message . So the 1 70 is just like a mild warning telling you, Hey, the prices going where you thought it was going. And then if you get the 1 65 that may mean that you have to start paying attention to this trade and the 1 60 would be where you want to be a little bit concerned about being ready to take action. If you need to exit the trade, some people will do less alerts me personally. I like to have the early warning so that I'm aware of what's going on in case I'm not watching the market that day and then I can decide. All right, let me at least keep my phone with me because I've hit the 1 70 mark. I want to make sure we don't get down toe 1 65 and it's just a way of protecting your capital. You work hard for your money, you wanna have a way of protecting it. So the way you do that is by having a plan and a system in place that will alert you when something's going wrong so that you can take action and take off some of that risk. If price starts to get down too far or exceeds the area where you feel this trade was wrong , Good luck to you and your trading. This is a great strategy to use. I use it all the time. And while sometimes it's hard to get filled on the trades you want, the trades are quite easy to manage most of the time and often times you can get a respectable gain. And sometimes you just get this small gain because Price doesn't move where it goes in the opposite direction. But that's okay, too. If you want information on how to set up the alerts in more detail on this particular think or swim platform, I have a lot of free tutorials available on my website, and you can access them at this link right here. And if you have any questions about this program for some suggestions on some other programs, you'd like to see more information about. Don't hesitate to email me at Coach SCL 59 at gmail dot com. So take care and have a great day.