The spx butterfly 0dte or less play

Here is the strategy:

Options that cash settle like spx will pay the difference in closing prices on spreads in cash(can also be closed out prior to close once theta has dropped).
During the day the spread on a 10 point wide butterfly might be 0, or even a credit, typically .3-.7 debit per butterfly is expected so $30-$70 risk for up to $1k profit.
To get into this contract you must buy 1 option(first wing) then sell 2 options(body) otm vs the first one by 10 points (for example you can spread this wider if you want) then buy 1 further otm from the body by the same as the first wing (risk free, or take a 5 point risk for more credit if you want to risk it)

Example for a put butterfly spread: spx at 4000, you buy a 3950, sell 2 3940, buy a 3930 (10 point spreads).
If spx closes above 3950 - contracts worthless, closes at 3949 - $900 (3950 worth $9 at closing other contracts worthless), closes at 3931 - $100(3950 worth $19, 3940 worth -$9x2 = $1, 3930 worthless) below 3929 contracts cancel each other out.

Basically this is a bet that spx will close in a range. If it lands in the goldilocks zone - lower than leading wing but higher than the body you can profit up to a max of the spread (10 wide - $999 max, 15 wide $1499 max)

The point of this trade is to limit risk and still have a possibility of good profits. Doing this on exercisable stocks can wreck you so be very, very careful on non cash settled stocks.

A live example was today - I bought 1 3750, sold 2 3740, bought 1 3725(risking an extra 5 points because this wing was not even to save on premium) for $0 (I did pay commissions). I could’ve held to see if it would hit but I got busy with work stuff so I set a sell limit for .5 and it filled. (and now that I’m writing this it is 3745 ($500 profit if it closes here, but the $500 risk if it ends below 3725 wasn’t worth the risk for me today - uneven wings means loss below 3730)

I will continue to do these and possibly play with the spreads depending on premiums which should fluctuate with time of day and iv. The hope is to capture multiple points itm on close or just before, hard to hit but low risk high reward.

This will eat some buying power, but I can’t think of a better risk/reward… yet…
I have some other ideas to try once the account gets some padding, but this is my current play other than scalping es mini contracts, I might also start some 0dte condors and mix with butterflies when volatility settles a bit.


Forgotten about this. If you can call it you can hit big, but good luck I haven’t had time to try most days due to work, had a 1:3 win loss (but win was more than losses) trying this at the end of the day, but now I butterfly long options to mitigate theta decay.
Bought jan 40/50/57c for $1 8/19
I keep the legs lopsided incase the stock skyrockets, then you have gains everywhere above $41
I buy calls short term against the middle strikes or buy middle strike out with spreads when rest of the market goes green or iv up jumps enough to make spreads lower.
I started doing this with vix as well. I’m learning to get into longer timeframes and build into positions rather than full port 0-1dtes otm options like a wsber

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