🦋 SPX 0DTE Butterfly Strategy: From $90 Risk to $1,000 Reward

[00:00] All right, I am working on my zero DTE Forest trading and I'm starting out today. The market just opened. We just had the Joltz jobs report. So, I was kind of letting the opening news open up and the market is up a little bit. We

[00:14] leaning bullish. We have the forecast and a few other setups. I don't want to go in the technical stuff of why I'm bullish. I want to go more into the idea of how to use very little risk to get into some trades. So, first of all, I

[00:30] bought two out of the money zero DTE call credit spreads. So, if we look at the activity, I bought them for4 each. S&P is trading at 5940 and change. And I

[00:43] bought the 59759.80. It's a little bit easier to see over here. With two contracts, I'm only risking $90 so far. And the idea here is if we do rally up to these strikes, I could sell an offsetting call

[00:58] credit spread to turn this into a butterfly. So right now, let me zoom in a little bit. Right now I have bought two calls, sold two calls at the 5980. So down here I have a 598085 call spread. If we do the same quantity, we

[01:14] would get two. And then if I add those to the chart, let's say I got filled. I'm not filled yet because I'm not going to place the order. The idea is if I could get 50 cents for the additional call spread to convert to a butterfly, I

[01:28] end up with a risk-free trade and a large payout at $1,000. So, if we rally dollar for this call credit spread. Therefore, my minimum gain would be

[01:43] $110. So, this becomes risk- free. So, the idea for this trade is to buy a call spread. If it goes in our favor, great. Sell an offsetting call credit spread to turn it into a butterfly and turn it into a risk-free trade. Now, if the

[01:58] market does not go up for some reason and my analysis is wrong, then I'm simply going to lose the $90 here. Let's see how it goes. Let's see what the 45 minutes from the previous clip. And the market has rallied a little bit. We

[02:16] are now up to 5955. So now the market is up 21 points. So I think from the points. I just entered one of the call credit spreads I mentioned in the

[02:28] previous clip. The market is up about 20 points now. That's another 10 or 12 points since the first clip and I was able to get a credit of 55 cents for

[02:40] that one spread. So I bought two call spreads and then I sold one call credit spread. When you net all of this out, that's 90 cents minus 55 cents and you end up with 35 cents. So that's exactly how much risk I have on less commissions

[02:56] of course. And I just wanted to show what that did to the risk profile. So now instead of having $900 all the way up, I've taken some of the potential gains above 59.80 or so and I've reduced my max loss risk by a little bit. So

[03:15] again, this is a very low probability trade, meaning I have to have the market move in the next, you know, couple hours or this thing's going to lose money. But now my loss is only at $35. So if the market moves up even farther, I might be

[03:31] able to sell another spread for 60, 70, 80 cents, a dollar like we talked about before, and therefore creating the risk-free trade. So I'm legging into this. I' I've reduced my risk and I've covered one of my spreads plus 10 bucks.

[03:45] we'll see how it goes. All right. So, I was able to leg call credit spread, converting the entire trade to basically a butterfly. I

[03:58] I basically put a limit order in to sell that additional spread for a dollar and it filled. Let's take a look at that. So, just to walk through all the trades

[04:10] at 10 10:15 a.m. This is Eastern time. I bought two out of the money call spreads. I sold one call credit spread to convert half of it to a butterfly.

[04:22] And then I put a limit order in which filled at 11:42. And now I'm uh doing this video a little bit later in the afternoon, but the trade is set and I'm in the trade and I'm now in a riskfree butterfly. And

[04:35] a few minutes ago, this was actually trading inside the tent. So, the plan right now is to just let it go. I may choose to we'll see what you know where it, but or maybe close half of it for a gain and guarantee some kind of win and

[04:52] then let the rest ride. But right now, I'm in a risk-free uh trade. Not quite a forest trade where I have multiple trees, but the grass is green and I do you next video.