My Risky Fed Day Butterfly

Why Fed Day Butterflies?

Trading 0 DTE (days till expiration) options is something I will do when the market is moving, and I have a solid gauge of market direction into the last hour or so of the day. Fed days are generally great days for this strategy, because the market has usually consolidated and built up energy awaiting the Fed announcement. The Fed announcement serves as a catalyst to cause price to explode, allowing traders an opportunity for a trade.

Setting Up The Trade

In this case, I used a small ($3.10) out-of-the-money butterfly when the market had already moved, but was breaking out further above resistance. It was riskier because I entered on a breakout, and if I was wrong, it had the likelihood of expiring worthless.

Taking Profits

I used a small size on this trade and took a conservative exit at 100% profit after seeing a reversal in the $ticks. In this video, I explain how and why I got in, how I managed the trade, and why I got out.

In this case, I took a 100% profit, but unfortunately for me, if I waited 15 more minutes, this trade would have been a perfect pin and 5x profit because the SPX closed just under my pinning price at 5225. There is always a balance between taking solid profits (100% of your debit) and trying to push it. Had I had more contracts, I could have scaled out. In this case, I am happy-ish with my management but generally, add more size so I can scale.

Check out my latest Trade Review video below!

P.S. For more Trade Review videos, check out my Youtube channel and subscribe to be alerted when I publish new trading content! 

Up Next...

Trade Review: Using a Neutral 0 DTE SPX Strategy

  In today’s Trade Review episode, I cover a quick SPX 0 DTE trade from last Friday at market close. In this video review, I cover: Why I decided to make a bet that the market would trade sideways into the close How I analyzed the options chain and technical chart patterns Why I decided … Read more

Read More

Butterflies + Put Credit Spreads Combined

A Bullish Earnings Call Last week, in the trading room, one of our members requested that I analyze the ticker AAP. This ticker belongs to Applovin, a company I’ve never traded before. This find is a prime example of the collaborative aspect of the trading room, and it’s why I appreciate our dedicated traders so … Read more

Read More

Walmart: Earnings in Focus

Walmart Earnings: May 16th Walmart is reporting earnings on Thursday, May 16th, before the bell. This is one of the most important earnings reports this week because it will show investors how the largest retailer in the United States and the world is faring. Between high inflation, consumer sentiment, and behavior, various factors could impact … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now