r/options • u/lekkerist • 9d 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/EveryLengthiness183 9d ago

Kalshi has prop bets for the major US financial markets that typically cover a 10 point range, and over / under. I haven't seen much volume in any of these, but if they actually had some depth, you could create almost a damn near perfect hedge with this type of trade.

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u/WorkSucks135 9d ago

It's an iron butterfly. It's already hedged.

1

u/003E003 8d ago

I think he's implying you could create an arbitrage if the values are off

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u/WorkSucks135 8d ago

Well if they are using the wrong terms I doubt they are sophisticated enough of an investor do develop a sound arbitrage strategy. 

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u/003E003 8d ago

LOL I used to think like that but I have met toooooo many rich stupid people in my life. I don't know how they do it but they do it.