I am still trying different types of trades, and today I had a for a long butterfly. A stock, WCG, really got beaten up on a government report. The IV spiked as you can see below.

So let’s look at the Butterfly

Volatility: Negative. We want options with friggin’ high IV’s. IV drops will help us.

PLAN I believe the market overreacted to the news. I expect the stock to move back up, and the IV to drop.

IVWCG’s IV spiked from the 20’s ~30’s to the 150’s ~ 200’s which is a lot. Volume is light, so there is more of a change for mispricing. That is retail traders paying more than they should. Or pick off paper, I don’t know which.

EXIT Lift either leg, once most of the premium is gone. Tighten stops and try to be out a week before expiration unless something is WAYYYY out of the money ( on the upside preferably )


WCG 45 C 1 1.7000
WCG 40 C -1 2.6000
WCG 40 P -1 9.9500
WCG 35 P 1 6.6500

Premium recv was $90 from one spread, and $330 for the other spread. Leaving me out in the wind for $80. I am looking for a IV drop to bring this one into the black. I don’t plan on seeing this one to the end. Two weeks max and I am out.