After our recent club webinar work with the Butterfly strategy I have decided to place a directional Butterfly where I would usually place a Long Put or a bearish Debit Spread. The reason is that I was already in a bear trade on AAPL (with the Long Put strategy) from a couple of weeks ago, and now AAPL has triggered another bearish signal (different system) so I am bearish again. Rather than use another expensive position (doubling my risk on a single stock) I have employed a cheap bearish directional Butterfly as shown. I will keep you posted as it unfolds.
Here is the risk graph of the trade I opened Monday morning (USA) on CAT using the CAT of Nines system. It is a Bear Credit Spread which is also known as a Bear Call Spread. It has been placed for a potential
$210 profit from my $1,040investment in 28 days. Let's see how it goes.
CAT has finally signalled a move, and it is bearish. The setup leads us to use a credit spread according to the system.
By the rules we select the expiry and strike by considering the ''Open Interest'' and ''Bid-Ask'' spreads within the first 21 days of available options.
But ... a special consideration for this particular trade is the pending speech by the USA Federal Reserve that has the US markets tied in knots. Lately CAT has been showing price increasing without any momentum support, and so it is more prone to fall than rise in my view; however, I will be watching the market reaction to the speech and deciding from that outcome.