Buying an AMZN call butterfly spread. This is a low probability trade. However, the stock has just triggered above an RSI 70 (gone into overdrive) and if momentum continues higher could be a great way to capture it.
Buy to open: AMZN Nov 29th (weekly) 215.00 strike call (ratio of 1)
Sell to open: AMZN Nov 29th (weekly) 225.00 strike call (ratio of 2)
Buy to open: AMZN Nov 29th (weekly) 235.00 strike call (ratio of 1)
Debit: 1.30
Max risk = 1.30 or $130.00 per spread
Max reward = 8.70 or $870.00 per spreadWe also bought a put butterfly spread in MTCH. However, the way we executed into this trade was a little different. We purchased the January 22.50 strike put first for 0.07 per contract. Then we got filled on the upper 1×2 put spread for 1.06 debit. The liquidity in the lower strike puts is not great (wide bid/ask spreads). So, purchasing the 22.50 strike put was better than the 20.00 strike put. Because they were basically the same amount of money. We got that order filled first and then did the upper strikes together. That completed the butterfly.
Buy to open: MTCH Jan 17th (monthly) 30.00 strike put (ratio of 1)
Sell to open: MTCH Jan 17th (monthly) 25.00 strike put (ratio of 1)
Buy to open: MTCH Jan 17th (monthly) 22.50 strike put (ratio of 1)
Debit: 1.13
Max risk = 1.13 or $113.00 per spread
Max reward = 3.87 or $387.00 per spread
This trade is an uneven butterfly. There is 5.00 distance on the upper strikes and only 2.50 distance on the lower strikes. That means we don’t have risk (only reward) as the stock falls. Our risk is solely if the stock goes sideways/higher in price.