Straddles, strangles, butterflies and calendars on SPX

Besides spreads and condors, the +Strat menu opens five more shapes: the iron butterfly, the straddle, the strangle, the butterfly and the calendar spread. Here is what each one looked like on SPX on the real option prices of 3 June 2024, and how one of them, a sold iron butterfly, did over the next three weeks.

1. One day, five shapes

The test starts on Monday 3 June 2024 with $100,000; SPX stood at 5,268.70. Press +Strat, pick a shape and type SPX. Each ticket is solved from that shape's starting values (the deltas and the days to expiry it names at the top), and every box can be changed. These are the tickets as they first came up, all on the 19 July 2024 expiry (46 days) except the calendar:

The straddle and strangle are bought by default, and the iron butterfly is sold; a buy or sell switch on each ticket turns any of them around. The butterfly and the calendar also switch between puts and calls. When a ticket fills, its legs are filed together as one group named after the shape: STR-1, STG-1, IB-1, BF-1 or CAL-1.

2. A sold iron butterfly, day by day

The iron butterfly sells a put and a call at the same strike in the middle and buys a cheaper put and call further out, the way a condor does but with no gap between the sold legs. That brings in much more money, and leaves much less room for SPX to move.

Preview → Execute filled it: sold the 5,305 put at 85.06 and the 5,305 call at 82.96, bought the 5,055 put at 25.04 and the 5,490 call at 16.04, a credit of 126.94, or $12,694. The preview showed a maximum loss of $25,000: the put side is 250 points wide, and the app shows the full width, before the credit.

It was closed on 25 June 2024 (tick its legs, Close → Preview → Execute). With commissions the account ended at $97,505.21, a loss of $2,494.79.

What this example shows

• These are the same days as the SPX iron condor guide. The condor, with its sold strikes near 20 delta, was down $663 on 25 June; the iron butterfly, sold at the money, was down $2,380. More money in at the start bought much less room.
• A steady rise is enough to hurt a sold butterfly: SPX never fell, it rose about 4% in two weeks and ran past the middle strike.
• Whoever bought that butterfly, or bought the straddle above, was on the other side of this move. Go back to 3 June in your own test, flip the buy or sell switch and step through the same days.

This example is one real run in Test My Legs on the recorded SPX option prices of June 2024. It is a backtest: it shows what happened on those days, not what will happen next.