On Friday, I was able to close out a butterfly for over 1200% profit.
I bought it for $1.34 per contract, and sold it for $16.30. This is the type of lotto ticket type trade in which all of my experience and analysis came together, for the perfect trade. Whenever that happens, it’s critical to go back and analyze how it all came together.
This starts with the very beginning (but stick around for the video down below)…
After I closed this trade, I received a lot of questions in the chatroom yesterday that I thought were critical to answer.
“Hey Danielle, how long did it take you to learn the various options setups and strategies? How do you go about learning each one, where there is so much to know? What is the best way I can follow in your footsteps?”
Learning Various Setups and Strategies
When I began learning to trade, I focused on primarily learning from my dad, as well as John Carter. His infectious way of teaching, and the way he encouraged his students made me feel like if he could do it… I could do it.
I began focusing on John’s setups — primarily the squeeze, and his strategies, which mainly focused on long calls and puts, along with spreads. My dad was the one right there with me to fill in all of the beginner questions I had.
After about a year and a half or so, I wanted to expand, and learn more. That lead me to Henry Gambell — John’s first protege, who’s now the VP of Simpler and happens to be one of the traders I work the closest with. We mirror John’s style in our own ways.
People ask, “Well, how did you know who to learn from next or where to focus?”
For me, it made sense to learn from someone else who focused on directional trading, in the Simpler-esq way, especially someone who’s followed John, derived his own take, and stuck with that. I particularly liked the way that he used butterflies, to complement an aggressive, directional setup, and make it more conservative.
It was actually from Henry that I learned how to use butterflies and unbalanced butterflies, particularly with Amazon. Now it’s something I incorporate into my trading almost daily, and I pass that along to you.
So — like always, I love to give credit where credit is due. But more than that, I hope my journey and explanations help you find your own way. Just like everything else, I’ve taken it and ran with it. Meshing it to the strategies I was already familiar with, to improve and add something new.
So, Why AMZN Butterflies?
I remember when I first started trading, and I didn’t know what strategies I liked, which tickers to focus on, and how to analyze a chart myself. For some reason, I decided to start trading Amazon on a weekly basis. There were a couple reasons.
- It’s really liquid in the options market.
- It has weekly options.
- There’s sufficient premium in AMZN, which enables you to place credit spreads out of the money and still sell them at a decent cost.
Hint hint: with butterflies, the high premium also works in your favor, because you have the option to place out of the money butterflies that can end up with exponential gains.
Normally, we don’t trade too many out of the money options here (because they’re low probability). But because AMZN has quite a bit of premium, even out of the money, it makes it a great candidate. It also, for whatever reason, seems to work really well with Fibonacci, the Voodoo lines, and key psychological values.
Shoutout: thanks again to Henry, for pointing out how well these work at key psych zones and Voodoos!
All of what I’ve just talked about combined to give me the opportunity to hit that homerun in Amazon I highlighted at the start…
Last Week’s Amazon Setup
Due to years of watching this play out, in this instance, I was looking for AMZN to trade to the key psychological value of $1950 by expiration.
AMZN — 15 Minute Chart
Here is a screenshot of AMZN directly before the close on Friday, April 26th. You can see that it is very close to $1950. This is ideal for a butterfly with a center strike at $1950, that’s expiring that day.
Here’s a picture of the analysis tab at closing on the AMZN fly:
AMZN analysis tab, showing the pink line nearing the pointy green line. (Make sure you watch the video for the in-depth explanation!)
How Do We Do It Again?
Just like anything else, practice makes perfect. Recognizing what works, and sticking with it — along with cutting out what doesn’t work. Now, nothing is EVER 100%, but, when you have one trade like this that can knock out several losers and still have plenty left over, it’s a pretty good spot to focus.
Stick with me, and we’ll work on getting you there. What’s the first step? Make your list of action items for how you can get to where you want to go:
- Who are your favorite mentors, and what are you focused on getting out of them? Is it a specific strategy or setup? You need to dial in on where to spend your energy, so you can better measure the impact of your efforts. If you’re all over the place, it’s hard to make progress.
- Make sure you nail what you’re focused on… before you add more to your plate. It’s not helpful to be scattered in a million different directions.
- At the same time, recognize when it’s time to improve a trading strategy. How can you improve? Who can get you there?
- The last piece is about determination and drive. Are you dedicated? This is 3/4ths of the battle. Determination without instruction on where to focus is much better than a multitude of resources with a lack of inspiration.
Let me know, down below! I hope you had a great Tuesday. I’ll see you in the next episode!