Chapter 9 Butterflies and Condors

Beyond basic call and put spreads, the interesting next step is trading butterflies and condors. Much of what goes into a call or put spread creates a good butterfly or iron condor. And just as with a call or put spread, creating a butterfly or condor with edge demands a firm grasp of three matters:

  1. Volatility
  2. Skew
  3. Management

In piecing these together, you create a butterfly or condor with high odds of success, even with an ATM spread, because you will trade with edge. The key is to use the information in front of you to piece the right trade together, both in choosing the right spread and in identifying strikes and expiration for maximum potential.

The Butterfly

The basic butterfly is illustrated in ...

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