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.

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