What are your options - Nasdaq 100 - Selling premium!

Bullish outlook

Broken wing put butterfly on Nasdaq 100

1. Decoding the trade configuration

• Buy: 1x put option at a 13,525 strike.
• Sell: 2x put options at a 13,500 strike.
• Buy: 1x put option at a 13,450 strike.

• Maximum risk: -$2,120.00
• Maximum profit: $2,880.00
• Breakeven point: 13,471.20
• Net premium: Credit of $380.00 USD.

• Enhanced profit potential: The BWBF offers more profitability on the downside due to its design, making it a moderately bearish strategy.
• Defined risk: The strategy caps the maximum risk to the difference between the long and short puts, minus the net premium received.

• Loss horizon: The primary risk with this strategy is if the index closes below 13,450 at expiration. However, contrary to a normal butterfly-strategy with symmetric legs, there's no loss if the index rises above 13,525; the strategy retains the full premium credit.

Neutral outlook

Iron condor on Nasdaq 100 index

• Buy: 1x Put option with a 13,475 strike.
• Sell: 1x Put option with a 13,500 strike.
• Sell: 1x Call option with a 14,925 strike.
• Buy: 1x Call option with a 14,950 strike.

• Maximum risk: $1,480.00
• Maximum profit: $1,020.00
• Breakeven points: 13,489.80 and 14,935.20
• Net premium: Credit of $10.20 USD or $1,020.00 for the entire position.

• High Probability of Profit: The Iron Condor profits when the underlying index remains within the range defined by the breakeven points. This range is wide, giving a significant buffer for price fluctuations.
• Defined Risk: The maximum loss is capped, determined by the difference between the strikes of each vertical spread minus the net premium received.

• Loss Potential: Should the index move significantly outside the range, the trade can result in a maximum loss. This occurs if the Nasdaq 100 closes below 13,475 or above 14,950 at expiration.
• Limited Profit Potential: The maximum profit is limited to the net premium received, which can be seen as a trade-off for the higher probability of success.

Bearish outlook

Call Broken Wing Butterfly on the Nasdaq 100 Index (NDX)

• Net Premium: Credit of $500.00 USD.
• Margin Impact: 1,757.02 EUR.
• Max Risk: -$2,000.00.
• Max Profit: $3,000.00.
• Breakeven: 15,030.00.

• Buy 1x Call at a 14975 strike.
• Sell 2x Calls at a 15000 strike.
• Buy 1x Call at a 15050 strike.

• Your maximum risk is capped at -$2,000. This is the most you can lose, and it would occur if the index rises above the highest strike price (15050) or falls below the lowest strike price (14975).
• Your maximum profit of $3,000 would be achieved if the index settles right at the 15000 strike at expiration. This is because both of the sold calls would expire worthless, and you'd keep the entire net premium received, plus any intrinsic value from the 14975 call.
• You'll break even if the index is remains below 15,030.00 at expiration.

• Below 14975: The loss is capped at the net premium received ($500) minus the difference in the strike prices of the bought calls (75 points or $750), which totals -$250.
• Between 14975 and 15000: Profit rises linearly, reaching its peak at 15000.
• Between 15000 and 15050: Profit starts to decrease but remains positive.
• Above 15050: The maximum loss of -$2000 is realized, which is due to the net cost of establishing the position (including the initial credit) and the increase in intrinsic value of the highest strike call.

• Liquidity: Ensure that the options have good liquidity to avoid significant bid-ask spreads which can erode profits.
• Expiry: This strategy will achieve maximum profitability near expiration if the index is near the 15000 strike. Monitor the position as the expiration date approaches.
• Adjustments: If the index moves significantly before expiration, you may want to adjust your position to lock in profits or minimize potential losses.

Conclusion