August M3

       Yesterday, I put on my simulated August M3 trade. For those of you who don't know what an M3 trade is, it is a strategy that consists of buying 20 put butterflies hedged with a long call. Generally, you put on 20 butteryflies but as long as the ration 20:1 is consistent, you could put on as many as you would like. The butterflies are placed 20-30 points below the current market position with a 50 point wing span. I like to buy a call that has enough Delta to bring the overall Delta value to -5 but if not I would buy a lesser Delta call and add verticals, like I did with the August M3. I prefer closing the position when it reaches 21-17 days until expiration because of the high Gamma trend but I can also close it if there is a high profit or loss.  Again, all credit for this strategy goes to John Locke and I appreciate that he is willing to share his strategy with the rest of the world.

       Below are the current Greeks and risk profile graph of the position. As you can see, the t + 0 line is flat, which is something I want to maintain throughout the trade. I will be posting any updates of the position when I add verticals, move the butterfly or close the position due to high profit or loss.