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Smiling Butterflies for SKF - Learn to Trade Options | #1 Options Trading Education

Smiling Butterflies for SKF

Published on March 20, 2009

Smiling Butterflies for SKF

March 20, 2009

As I mentioned in my earlier post, an expiration Friday is a Thrilling Friday full of opportunities but mostly speculative. Intrinsic Value driven by Time Value and Implied volatility reduces to almost zero and creates powerful leveraging instrument. On an expiration day 100% of returns are not unusual. In fact I am yet to break my record for +1,200%.

If one can accurately estimates pinning points, butterflies usually offers one of the most rewarding trades. I decided to take chance on SKF expiration and play speculative strategy, High Risk High Reward.

(You may want to sign-up for the Basic Membership (Free until Dec 2009) that I use to share free trade alerts for registered members). I hope you saw my notifications on NKE and FDX timely on Invescafe.

Here is a Trade on SKF. Before you proceed to read, pls note that I am assuming that I will lose all my investment in this trade in case it doesn’t work out the way I want it to. Hence if you decide to follow that logic pls do so with the money that you are not worried to lose 100%.

skf-smiling-butterflies I purchased 120 and 130 butterflies, 5 strike wide. The overall cost was $0.83 for 130 call butterfly and $0.90 for 120 call butterfly. Total cost US$1.73. Assume 2 butterfly for each, that means the cash outlay is $346. If SKF expires today either at 120 or 130, my potential is to make nearly $600. The trade will make money as long as SKF closes between 116.71 and 1223.32, or $126.7 and $133.2. As of this writing, the spreads are already profitable. Pls note that I may adjust or close early and may not be in a position to share the plan timely. Though I shall update at the earliest via posting in the comments section.

Don’t forget, though these are smiling, it can turn into crying ones (though limited tears)..

Have fun, Profitable Trading, OP

6 Comments

  • OptionPundit says:

    I already mentioned my bias on Google Pinning on the forum (member’s only section). So far I am still with SKF both flies.

  • OptionPundit says:

    Based on the reading so far, Looks like GS will be pinned at 100, POT at 80.

  • OptionPundit says:

    As of this writing the smiling butterflies are up almost +25%. Those who wants to book profit and relax, close and have fun. GS and POT are still towards the levels I mentioned earlier. Next is AAPL, it’s interesting to see where will it pin 100 or 105? Looks like NKE is tracking towards $45 Pin.

    what do you think?

  • OptionPundit says:

    Seems like AAPL will do it at 100, as of now tracking towards 100 on increasing volume. I just finished my partial AAPL trade for almost +100% gains (bot Mar 100 Puts). Both NKE and FDX are falling hard and as of this writing SKF is inching towards 130. SKF can swing in either direction fairly quickly.

  • OptionPundit says:

    An excellent day, the smiling butterfly smiled, in fact laughed. The SKF closed @ 129.09. closing values of these butterflies are -0.20 and -4.03, let’s round it off to $4.00.

    Net gains are $400/$346 = + 115% gains in one day (x commissions of two butterflies)

  • […] who followed the notice and decided to follow the trade must have benefitted as well. Then I shared smiling butterflies on SKF, High Risk High Reward Trade, and it closed for +100% gains for one day holding. NKE was pinned at […]

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