About Long Put Butterfly
A long put butterfly spread consists of put options at three equally spaced exercise prices within the same expiration, combining a bear put spread with a bull put spread. In a long put butterfly, the outside strikes are purchased, and the inside strike is sold. The ratio of a fly is always 1 x 2 x 1. The long put butterfly strategy succeeds if the underlying price is trading above the lower break even or below the upper break even, ideally at the middle strikes.
Example: 245 / 242.50 / 240.00 fly
- Bear Put Spread: AAPL with 11/15/19 expiration - Leg1 Strike = 245.00 (Leg1 Ask=8.10) and Leg2 Strike = 242.50 (Leg2 Bid=6.75)
- Bull Put Spread: AAPL (last price 242.55) with 11/15/19 expiration - Leg1 Strike = 242.50 (Leg1 Bid = 6.90) and Leg2 Strike = 240.00 (Leg2 Ask=5.85)
For the example above, you receive 1.05 for selling the 242.5 / 240 bull spread and you pay 1.15 for buying 245 / 242.5 bear spread.
- Net debit on the fly is .10.
Max Profit
Max profit is the strike differential minus the debit. In the example, strike differential is 2.5 and debit is 0.10. Max profit = 2.4. This is achieved if the underlying expires at 242.5.
Max Loss
Max loss is the debit paid (0.10) and will be incurred if the underlying expires below 240 or above 245.
Break Even Calculations
Upper break even is the higher put strike minus the debit paid. In example, 245 - .10 gives upper break even of 244.9. Lower break even is the lower purchased strike plus the premium paid. 240 + 0.10 = 240.10 lower BE.
Both risk (net debit) and max profit are limited in this strategy.
The screener results are initially sorted by descending "Probability."
Options information is delayed a minimum of 15 minutes, and is updated at least once every 15-minutes through-out the day. The screener displays probability calculations based on the delayed stock price at the time the strategy is updated. The new day's options data will start populating the screener at approximately 8:55a CT. Strikes that have not traded today are excluded from the results.
Main features of the Screener include:
- Ability to add various filters, with hundreds of different combinations.
- Save a Screener: When you've defined filters that you want to use again, save the screener.
- Load a Saved Screener: Select a previously saved set of Screener filters to view today's results.
- View the Results using Flipcharts: Page through charts of the underlying symbols on the results page.
- Download the Results: Download up to 1000 results to a .csv file. The Download will also pull all of the data fields present on the View you use.
- Automatic Screener Emails: This option is available for Barchart Premier Members. When you save a screener, you can opt to receive the top 10, 25, or 50 results via email along with an optional .csv file of the top 1000 results. Emails can be sent at Market Open (9:00am CT), Mid-Day (12:00pm CT), End-of-Day (4:45pm CT), and Overnight (3:00am CT) Monday through Friday.
Note: When selecting the Filter View for your Screener email, a filter must identify a specific search value in order for it to be included in the email.
Filters
Barchart Premier subscribers can add or modify different filters on the screener to find calls on the most favorable stock options.
Reordering Filters
Once filters are added, you may drag and drop them in the SET FILTERS tab to reorder the way they appear on the RESULTS tab (when using the Filters View). Each filter you add has the "Order" icon which is used to reposition it.
Deleting Filters
To remove a filter from your screener, click the checkbox to the left of the filter name, then click the red "Delete" button at the top of the column. You may also select all filters for deletion by clicking the checkbox at the top of the column, which selects ALL filters for deletion. You will be asked to confirm your decision to delete.
So you can focus on the best options, the screener starts by setting certain options:
- Days to Expiration (monthly and weekly expirations) is 60 days or less
- Security Type is only Stocks
- The Options Volume for Leg1, Leg2 and Leg 3: for US market, must be greater than or equal to 100. For Canadian market, must be greater than or equal to 1.
- Open Interest for Leg1, Leg2 and Leg 3: for US market, must be greater than or equal to 500. For Canadian market, must be greater than or equal to 5.
- Moneyness Leg 2 is between -5% to 5% (ATM)
- Probability is greater than 25%
- Ask Price for both Leg 1 and Leg 3 is greater than 0.05
- Bid Price for Leg 2 is greater than 0.05
In addition, the option must not be a "restricted" option (the option cannot be based on a split stock).
Note: Non-standard or "restricted" options (options quotes marked with an asterisk * after the strike price, and found on an individual symbol's options page) are automatically removed from the screener. A "restricted option" is typically created after spin-offs or mergers, and is not tradeable.
Probability Calculation
We take the underlying stock price (l), the target price (b), days to expiration (t) and the implied volatility (v) to calculate probability:
Probability Above = 1-NORMSDIST (LN(b / l) / (v*SQRT (t / 365)))
Probability Below = NORMSDIST (LN (b / l) / (v*SQRT(t / 365)))
b = target price
l = underlying last price
v = implied volatility
t = days to expiration
Long Put Butterfly Break Even:Probability of the underlying trading inside of the break even points at expiration.
Long Butterfly Max Risk Probability: Probability of the underlying expiring below the lower put strike or above the highest put strike.
Views
The Results page contains three standard views. You may switch the view using the links at the top of the screener results table. The Main View shows the Volume and Open Interest for each option, while the Dividend & Earnings View can be used to highlight strategies with upcoming dividends and earnings. The Filter view shows you the data contained in the field(s) you've added to the screener.
A checkbox is provided on all Views to "Show Strategy Description" in the view. The Strategy Description can be helpful in breaking down how the options strategy was built. Example of a Long Put Butterfly description:
LPB_10/14/22_54.00_6.00
where:
LPB = strategy 10/14/22 = expiration date 54.00 = Leg 1 strike 6.00 = Strike Differential (difference between each leg: Leg1, Leg2 and Leg3) Main View
- Symbol - the underlying equity. Clicking on the symbol will take you to the current quote page.
- Price~Â - the delayed stock price at the time the strategy is updated for the underlying equity.
- Exp Date - the expiration date of the option
- Leg 1 Strike - the price at which the underlying security can be bought if the option is exercised.
- Leg 1 Ask - ask price of the Leg 1 option
- Leg 2 Strike - the price at which the underlying security can be bought if the option is exercised.
- Leg 2 Bid - bid price of the Leg 2 option
- Leg 3 Strike - the price at which the underlying security can be bought if the option is exercised.
- Leg 3 Ask - ask price of the Leg 3 option
- +BE - Upper break even is the higher put strike minus the debit paid.Â
- -BE - Lower break even is the lower purchased strike plus the premium paid.
- Max Profit - Max profit is the strike differential minus the debit.Â
- Max Loss - Max loss is the debit paidÂ
- Payout% - (spread differential - net debit) / net debit
- Break Even Probability - the probability the last price will be at or beyond the break even point at expiration.
Dividend & Earnings View
- Dividend - the dividend the equity pays on the Ex-Dividend Date. On the morning of the Dividend Ex-Date, the stock's price is lowered by the amount of the dividend that was just paid.
- Dividend Ex-Date - the first day on which the stock trades without the dividend. If you wish to receive the dividend, you must own the stock by the close of market on the day before the Dividend Ex-Date. Many times, a covered call is exercised early so the buyer can own the stock and collect the dividend. This typically happens to ITM options the day before the Dividend Ex-Date.
- Earnings Date - The date on which a company is expected to release their next earnings report. The prices are more volatile, which tends to inflate the prices of the near-the-money strikes. During a contract period when there is an earnings report due, the earnings announcement can dramatically shift the range in which the stock has been trading.
