Dan Sheridan’s Iron Butterfly Rules

Written on May 12, 2008 by OptionsRopeaDope

Dan Sherican just came out with a new webcast on the OIC website. The webcast has “iron butterly” in the title, but all the examples are traditional call debit butterflies. He does say that there is essentially no difference betwrrn them. Here are the rules:

  • 30 days until expiration
  • Profit target is 12-15% in 14 days
  • Max loss is 20%
  • Long strikes are 1 15-day standard deviation away from shorts.
  • Purchase extra calls to neutralize deltas. (do not have to be same strike as your long)
  • Adjust when: RUT move 30 points, hit expiration break even, or have a 10% loss
  • djust by adding a debit spread, with short strike ATM, if RUT moves up.
  • adjust by removing lower spreads steadily on the down side.

At the end, he has an impressive slide showing that if you followed the plan for the last year (I think), it returned over 100%, and had 10 winning and 3 losing months.

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    • Category Posted in Dan Sheridan, Trading Rules, Butterflies

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    1 Comment »

    Comment by Ernst
    2008-07-15 18:35:06

    check this blog, written by a Sheridan Student, describing his monthly butterfly trade

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