Reverse Butterfly Option Strategy Pros/Cons

I was creating revers butterfly, and It looks perfect to me. Properly Hedged and Maximum Probability of profit. But I had doubt when this is so good why don’t people use this? So I have few questions.

  1. What are the chances of losing money? other than Expiring within break even points.
  2. Do I really need to wait till expiry OR may be someday i can get decent profit before expiry itself.

Note: I read and watched videos on this , but knowledge is limited to the one who is sharing. So I Asked here for multiple opinions.

Only catch here is you are going to earn max profit (1.5k - Brokerage and other charges) only at Expiry not before that, which is 20 days away.

So, 1.5k profit (- Brokerage and other charges) in 20 days for blocking 57k capital. Worth it?

As the saying goes Something Is Better Than Nothing, this is good for risk averse traders but not for those who want to take higher risks.


Because it will block your capital. So, it’s a waste of time for retail traders. Safe strategy for traders with huge capital, but not for retail traders with limited capital.

Do not blindly go with these payoffs.
Spread will kill your strategy.

See the banknifty spreads for 30th Jul 2020 Expiry

1 Like

Right. Wide bid ask spread will take profit.
Always play with nifty options since that are liquid and slippage will be less.

I din;t get… Please explain.

Problem of this strategy i found that if the market moving in our direction either side can’t see the profit that is the problem you only see the profit at the expiry day only .
when we see this pay off chart , we think that banknifty moving definitely wildly in this period but even if banknifty move wildly you cant see the profit .it all about how it behave in expiry

What if choose weekly options?

Risk reward will be like 8:1.
Max profit 200-300
Max loss 1400-1600

1 Like

How to avoid slippages? Major disadvantage of this strategy is premium slippage.
Please let me know to atleast minimize slippages.

Placing limit order is only solution.