If you trade a small account, you probably know that one of the biggest challenges is that commissions eat up a good chunk of your profit on a small options trade.
Note that the reason to risk a small amount per trade is that a small dollar amount can be a significant percentage of equity in a small account.
The trade begins with a slightly bearishly positioned Put Butterfly in SPY with 7 point wide wings. The trade is positioned slightly below the money and, due to skew, the trade will benefit if price trades lower.
On the downside, I roll down the Butterfly to ATM when price trades to within 2-3 points of the lower long leg.

Enter the trade when the market is short term overbought and less likely to trend consistently higher. The first upside adjustment for the trade takes place when price trades outside of the expiration break even on the upside. If price violates the upside again, the trade rolls the lower Butterfly up to 2 points below the current SPY price.
The rolling process continues on the upside, but the trade should never exceed the maximum loss and commissions should be factored in. On the downside, I take off the Butterfly and reposition it ATM when price trades to 2 or 3 points above the lower long leg.

The guidelines above are rules that I’ve developed by trading the Migrating Butterfly Strategy. This post is not a recommendation to take a trade and is provided for educational purposes only.

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