I lost 67 cents on a trade this week. I also made $1.45 on Broadcom the same night.
| | | I want to talk about the Google trade. | This week I had a Google Superfly butterfly. Paid 67 cents. It expired worthless. | Zero. Gone. | Do I care? Not even a little. | Here's why. | The maximum I can lose on any Superfly trade is what I paid for it. 38 cents. 55 cents. 67 cents. That's the total exposure. | When a butterfly misses, it goes to zero and I move on. When it hits, the return is measured in multiples. | The same week I lost 67 cents on Google, I closed a Broadcom butterfly for $2.00. Paid 55 cents. That's 263% on one trade. | Net result: I made $1.45 more than I lost. In one night. While I was asleep. | This is the math most traders refuse to accept. | They can't stomach a loss going to zero, so they avoid the strategy that produces triple-digit returns. They'd walk away from 263% gains just to avoid ever seeing a zero. | A zero DTE butterfly is a three-leg options structure. | You buy one option at a higher strike, sell two at the center strike, buy one at a lower strike. | Your maximum loss is the debit you pay. Your maximum gain is the width of the spread minus that debit. | In a VIX 30 market, those payouts are substantial. | Here's the full picture from the last three weeks: | AVGO (3/27): Paid $0.55, closed at $2.00. Return: 263%. Tesla (3/11): Paid $0.55, closed at $2.10. Return: 281%. Meta (3/23): Paid $0.63, closed at $2.00. Return: 217%. Apple (3/13): Paid $0.38, closed at $1.20. Return: 215%. Tesla (3/20): Paid $0.50, closed at $1.34. Return: 168%. AVGO (3/25): Paid $0.67, closed at $1.38. Return: 105%. Tesla (3/25): Paid $0.65, closed at $1.35. Return: 107%.
| Not every one hit. Some went to zero. The ones that hit paid for the ones that didn't — and then some. | That's the framework. Defined risk. Asymmetric upside. | The expected move does the targeting. The butterfly does the math. The overnight session does the work. | The traders getting crushed right now are paying full premium on naked options and watching vol eat them alive even when they're right on direction. | They're afraid of a zero. So they pay for optionality that kills them slowly. | I'll take the occasional 67-cent zero. Every single time. | Don't hate the player. Hate the game. | If you want to receive these trade alerts as I'm placing them, click here for the details. | To your success, | Don Kaufman | P.S. The expected move on your favorite big tech name is sitting there right now telling you exactly where it thinks price is going. Pull it up. That number is the only thing that matters before you place any trade. | | |
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