Hello Investors,
Today we discussed probability vs risk/reward. This is an important discussion when it comes to trading butterfly spreads. A typical butterfly spread will be on the lower end of probability. However, the trade off is an excellent risk/reward ratio. This is the case today in a new trade in QQQ.
Buy to open: QQQ Dec 18th (monthly) 275.00 strike put (ratio of 1)
Sell to open: QQQ Dec 18th (monthly) 245.00 strike put (ratio of 2)
Buy to open: QQQ Dec 18th (monthly) 215.00 strike put (ratio of 1)
Paid debit of 4.52
Max risk = 4.52; Max Reward = 25.48
We will have another class this Friday morning for September monthly options expiration.
Happy Trading!