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Options Butterfly Spread for Range-Bound Stocks

r/optionsoptionsMonthly (30-45 DTE)by reddit_community

Butterfly spread on range-bound stocks centered at current price. $1-2 cost, $5 max profit. 30-45 DTE. Lower win rate (40-50%) but excellent payoff ratio.

ENTRY RULES

Stock has been range-bound for 2+ weeks | Center strike at current price (ATM) | Wings $5 wide on each side | 30-45 DTE | IV Rank above 40% (higher premium collected) | Cost should be less than 40% of max profit

EXIT RULES

Close at 50% of max profit | Close at 21 DTE regardless | Stop loss at 75% of premium paid | Adjust wings if stock drifts away from center | Never hold to expiration (pin risk)

INDICATORS

IV RankSupport/ResistanceProbability of Profit

ORIGINAL POST

198
r/optionsposted by reddit_community

Options Butterfly Spread for Range-Bound Stocks

When a stock is range-bound (trading between clear support and resistance for weeks), buy a butterfly spread centered at the current price. Maximum profit if stock stays near the center at expiration. Much cheaper than iron condors. Use 30-45 DTE. The trade costs about $1-2 per butterfly and can pay $5 at max profit. Win rate lower (40-50%) but the payoff ratio is excellent.

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