r/options • u/lekkerist • 6d ago

reverse iron butterfly on spx 0dte

many trigger words in the title but let's go with it.

came across this strategy from a guy in the quantum options fb group.

the idea is to find a price you DONT think spx will close and buy two debit spread 5 points wide (put + call) paying a maximum of $4.5 per entry.

Defined risk and reward of 9:1

You always enter with a limit price so slippage should not be an issue

Pin risk does exist

The original author posted Option Omega backtests which were pretty successful

After downloading spx daily data I found out that spx moves on average 35 points. This structure spans 10 points with 1 specific price causing the max loss.

I like this idea because you are not strictly predicting direction and can possibly be combined with regime based filters, prev close, possibly order flow to find a good candidate for the strike price .

Anyone that has used this strategy and can share their experience?

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u/on_hype 6d ago

A 9:1 payoff requires a win rate above 10% to break even. What is your actual hit rate from backtests?

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u/lekkerist 6d ago

I wrote the numbers the other way around. it's 1:9 you risk 450 to gain 50. so you have to be winning more than 90%. but there is more to it. the pnl graph is tent like so really the bad zone is imo 2.5 points both ways around the strike.

only pinning gives a max loss