NDX has been on a huge run lately, here is one way to profit if NDX continues to slowly drift higher. Let’s take a look at a Broken Wing Butterfly using calls.
This setup has no risk to the downside. If the market rallies you have the potential of landing in the profit tent. The problem is, you don’t want NDX to rally and reach the tent too early. Around 4-5 days to expiry would be good.
Here’s the setup:
Date: October 23rd 2013,
Current Price: $3365
Trade Details: NDX Broken Wing Butterfly
Buy 1 NDX Nov 14th $3475 call
Sell 2 NDX Nov 14th $3500 calls
Buy 1 NDX Nov 14th $3550 call
Premium: roughly $40 Net Credit
Max Loss: $2,440
Max Gain: $2,560
Breakeven Points: 3525
Profit Target: 20% or roughly $500
Stop Loss: 10% or roughly $250
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