In the video by Options with Davis, you will learn about a highly effective options strategy with a 90% win rate. This strategy, known as the broken wing butterfly, can generate consistent profits regardless of whether the market goes up, down, or sideways. In the video, you will see live trading results that demonstrate a remarkable 96.07% win rate. By watching the video, you can learn how to construct this strategy step-by-step, using option strikes and deltas in the thinkorswim platform. The broken wing butterfly is a variation of the butterfly strategy that offers a high win rate and serves as a good semi-hedge for a long portfolio. It has a favorable risk-to-reward ratio and is psychologically easy to trade. Whether you’re a beginner or an experienced options trader, this strategy can help you become consistently profitable in any market condition.
Strategy Overview
Introduction to the 90% win rate options strategy
If you’re looking for a highly profitable options strategy, then the 90% win rate options strategy may be just what you need. This strategy has been proven to generate consistent profits in any market direction, making it a valuable tool for both experienced traders and those new to options trading.
Profitability in any market direction
One of the key advantages of the 90% win rate options strategy is its ability to profit in any market direction. Whether the market is going up, down, or sideways, this strategy has been designed to capture profits and minimize losses. This versatility makes it an attractive choice for traders who want to generate income regardless of market conditions.
Live trading results with a 96.07% win rate
To further demonstrate the effectiveness of the 90% win rate options strategy, live trading results are shared in the video. These results show a remarkable win rate of 96.07%, highlighting the consistent profitability of this strategy. By watching the video, you can see the strategy in action and gain confidence in its performance.
Learning how to construct the strategy
The video provides step-by-step instructions on how to construct the 90% win rate options strategy. While it may have a few more steps compared to other strategies, once you become familiar with the process, it becomes simple to implement. By following the guidance provided in the video, you’ll quickly learn how to construct this strategy and start generating profits.
Summary 1: Generating Income with Credit Spreads
Credit spreads are a popular strategy for generating income in options trading. By selling options contracts with higher premiums and simultaneously buying options with lower premiums, traders can earn a credit upfront. This credit represents the maximum potential profit for the trade. With proper risk management, credit spreads can be an effective way to generate consistent income.
Summary 2: Consistent Income with the Iron Condor
The Iron Condor is another income-generating strategy that involves selling both a put credit spread and a call credit spread. By placing these spreads with a wider range of strike prices, traders can collect more premium and increase their potential profits. The Iron Condor is known for its ability to profit as long as the underlying asset remains within a specific range, making it a reliable strategy for consistent income.
Summary 3: Recurring Profits with the Wheel Strategy
The Wheel Strategy is a popular options strategy for generating recurring profits. It involves selling cash-secured puts on stocks you are willing to own at a lower price. If the stock price remains above the strike price of the put, the option will expire worthless, and you keep the premium as profit. If the stock is assigned to you, you can then sell covered calls to generate additional income. The Wheel Strategy is a conservative approach to options trading, ideal for long-term investors looking to generate regular profits.
Broken Wing Butterfly Strategy
Introduction to the broken wing butterfly strategy
The broken wing butterfly strategy is a variation of the butterfly strategy. It offers a high win rate and profitability in various market directions. This strategy acts as a semi-hedge for a long portfolio, providing downside protection while still allowing for potential gains. With its good risk-to-reward ratio and psychological ease of execution, the broken wing butterfly strategy has become a favorite among options traders.
Variation of the butterfly strategy
While the broken wing butterfly strategy shares similarities with the traditional butterfly strategy, it differs in the way it is constructed. By adjusting the strikes and introducing a long put option, the broken wing butterfly strategy eliminates the risk to the upside and focuses the risk only on the downside. This adjustment allows traders to enjoy the benefits of a butterfly strategy while keeping the potential for losses in check.
High win rate and profitability in various market directions
The broken wing butterfly strategy has been proven to have a high win rate, often exceeding 90%. This means that the strategy consistently generates profits for traders. Additionally, the strategy is designed to be profitable in various market directions, making it a versatile tool for traders who want to capitalize on market movements regardless of their direction.
Semi-hedge for a long portfolio
For traders with a long portfolio, the broken wing butterfly strategy serves as a semi-hedge. While it is not a complete hedge, the strategy offers downside protection and helps offset potential losses in the long portfolio. This feature makes it particularly attractive to investors who want to manage risk while still having the opportunity to profit from market movements.
Good risk-to-reward ratio and easy to trade psychologically
The broken wing butterfly strategy boasts a good risk-to-reward ratio, often slightly better than 1:1. This means that the potential profit outweighs the potential loss, providing traders with a favorable risk profile. Additionally, the strategy is relatively easy to trade psychologically, as the risk is clearly defined, and the potential for profit is known upfront. This ease of execution makes the broken wing butterfly strategy suitable for both beginner and experienced traders.
Consistent profitability regardless of market conditions
One of the most significant advantages of the broken wing butterfly strategy is its consistent profitability regardless of market conditions. This strategy can generate profits even in volatile or uncertain market environments, providing a reliable income stream for traders. By following the strategy’s guidelines and adjusting positions when necessary, traders can expect to see consistent profits over time.
Construction of the Broken Wing Butterfly
Using option strikes and deltas in thinkorswim platform
To construct the broken wing butterfly strategy, traders can utilize option strikes and deltas in the thinkorswim platform. This platform provides the necessary tools and data to identify suitable options contracts and strike prices for the strategy. By analyzing the deltas of different options, traders can determine the appropriate strikes to create a balanced broken wing butterfly position.
Explanation of put broken wing butterfly strategy
The put broken wing butterfly strategy involves selling a put option with a lower strike price, buying a put option with an even lower strike price, and buying a put option with a higher strike price. This combination creates a position where the risk is limited to the downside, providing traders with protection against significant losses.
Components: Selling a put with a lower strike, buying a put with a lower strike, and buying a put with a higher strike
The three components of the put broken wing butterfly strategy work together to create a well-balanced position. By selling a put option with a lower strike price, traders receive a credit that serves as their potential profit. Buying a put option with a lower strike price serves as protection against larger losses if the market moves significantly downwards. Lastly, buying a put option with a higher strike price defines the maximum potential loss for the trade.
Max loss and buying power effect ($500)
The maximum loss for the put broken wing butterfly strategy is limited and known upfront. This allows traders to manage their risk effectively. Additionally, the strategy has a defined buying power effect, which represents the amount of capital required to enter the trade. With a buying power effect of $500, the strategy offers traders the opportunity to participate in high-probability trades with limited capital exposure.
Adjusting the credit received for a bigger or smaller tent
Traders can adjust the credit received for the put broken wing butterfly strategy to create a bigger or smaller potential profit. This adjustment is referred to as “adjusting the tent,” which is the range between the lower and higher strike prices. By widening or narrowing the tent, traders can customize the strategy to meet their risk tolerance and profit objectives.
Impact of adjusting the strike on buying power effect and max loss
When adjusting the strikes in the put broken wing butterfly strategy, it’s important to consider the impact on the buying power effect and maximum loss. Changing the strikes can affect the capital required to enter the trade and the potential loss. By understanding this impact, traders can make informed decisions that align with their risk management goals.
Max profit ($543) and max loss ($491) with risk reward ratio slightly better than 1:1
The put broken wing butterfly strategy offers a maximum potential profit of around $543 and a maximum potential loss of $491. This risk-to-reward ratio is slightly better than 1:1, providing traders with a favorable profit potential compared to the potential loss. By carefully managing the position and adhering to the strategy’s guidelines, traders can aim for consistent profits while keeping their risk in check.
Achieving 90% win rate with the strategy
By following the construction guidelines and implementing the put broken wing butterfly strategy effectively, traders can aim for a win rate exceeding 90%. This high win rate indicates the strategy’s ability to consistently generate profits over time. With proper risk management and adherence to the strategy’s principles, traders can increase their chances of success and achieve impressive results.
Additional Resources
Availability of a free copy of the options income blueprint
As a bonus, viewers of the video can access a free copy of the options income blueprint. This blueprint provides additional information and guidance on options strategies, including the 90% win rate options strategy. By acquiring this resource, traders can deepen their understanding of profitable options trading and enhance their ability to generate consistent income.
Accessing the options income blueprint through a provided link
To access the options income blueprint, viewers can use the link provided in the video. This link directs them to a page where they can download the blueprint and gain valuable insights into options trading strategies. By leveraging this resource, traders can further develop their skills and increase their profitability in the options market.
Conclusion
The 90% win rate options strategy, specifically the broken wing butterfly strategy, offers traders a highly profitable and versatile approach to options trading. With its ability to generate consistent income, protect against downside risk, and deliver impressive win rates, this strategy has become a favorite among traders. By understanding the construction process and implementing the strategy with discipline, traders can position themselves for long-term success in the options market. Remember to always conduct thorough research and practice responsible risk management when engaging in options trading.