Trading Butterflies Overnight

Choosing Your Expiration Date

Butterflies are a strategy that can be used on various time frames, from intraday using 0-day till expiration options, overnight close to weekly expiration, 7-14 days out for a swing trade, or longer. Generally, I prefer to keep my expiration below 14-21 days, or else the trade takes too long to mature. Still, traders who are longer-term swing traders can use the strategy on a longer time frame (so long as the trade is wide enough for the expected move during that time frame).

Your Trading Setup

The use of the butterfly and the time frame you select is going to depend entirely on the original setup you had when you got into the trade. That is what makes the difference in the time frame. If you have a setup that will move the market for 30 minutes, then you have a day trade on your hands and something that should be coupled with options that expire that day or that week if you’re nearing Friday.

But, for those who don’t like day trading, and want to switch to swing trading, there is a way you can do it very short term, as in overnight. Overnight gaps are a frequent occurrence in the market, and there is a setup you can use to trade them. This setup is called the 15 minute squeeze, and traders can use it to enter at the end of the day to trade a stock for a likelihood for an overnight gap up.

Trade Review: Overnight Butterfly in Microsoft

In the latest trade review video, I explain how I used a 15-minute squeeze in Microsoft to time a gap to a new high for a quick in-and-out $300 win.

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