The above demonstrated strategies (Long Butterfly etc) belong to the class of options spread strategies. Such spread strategies prevent against total loss as well against unlimited loss by automatically capping (cutting) the losses. One can tailor such a construct oneself by choosing different strikes etc., thereby tailoring the risk/reward profile. Such an options spread can be created by using Calls, Puts, or both combined, cf. above link. See also https://en.wikipedia.org/wiki/Options_strategy
The options construct in the previous posting is known as Long Condor. Like the said Butterfly, the Condor too belongs to the class of options spreads.
I've been looking at the Iron Condor the problem with that is the maximum loss is too high even if you adjust the top part to be wider. I am still trying to lower the long butterfly's maximum profit, can you show me a setup with SPX using long butterfly and a lowered maximum profit with a wider breakeven distance at the bottom?
With some constructs and parameters you can have MaxLoss=0 Sometimes even a profit as the minimum, ie. arbitrage I have a simulator for such optimization jobs. Will do if time permits. Let me know all the boundaries (min, max, step) for all the parameters. The strategy can consist of any number of legs consisting of any of Long/Short Stock/Call/Put, and Cash (as required for CashSecuredPut). Qty can differ for each leg, as well DTE, as well the entry day... But it's designed for CashAcct only, ie. not for MarginAcct. It affects the PnL calcs.
Anyone know a website where there is a more thorough look at this probability distribution, maybe one with a sliding rule that's adjustable for viewing purposes?
Please share a setup for SPX using long betterfly or Iron Condor where you are able to get Max loss to 0 or lose to 0. I can get the probability of max loss to 0 but not the Max Loss in $$$ to zero. Also please share a setup where the probability of any profit is greater than 80% using the butterfly.
Simple: take strikes that are more distant from current spot. Just simulate with this online tool: https://optioncreator.com
Interesting. Pretty much supports my view here that prices are pretty much a 50/50 odds. In this case it shows a toss up on the close. https://www.elitetrader.com/et/threads/flip-of-a-coin-but.372081/ If the stock market is trending since inception, it means that you see "fatter" side of the bands, which you kind of do. But it's not by much.