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On 8 Feb, $S&P 500(.SPX)$ is forming a bearish candle and I have opened the Broken Wing Butterfly (BWB) expiring on 28 Feb, for credit of $195. The vertical spreads for this BWB are:

• Bull Put Spread 5730/5830

• Bear Put Spread 5830/5880

Option analysis of the Broken Wing Butterfly. (Note that the numbers are different from the time the trade is filled.).

Forming my outlook:

For the upcoming weeks in February, there are several upcoming events as well as ongoing events that may move the market. Examples:

• During week 10 to 14 Feb, Fed Chairman is speaking as well as CPI and PPI results. I don’t know what will happen, but, there is potential for market to move in any direction.

• $NVIDIA(NVDA)$ is scheduled to announce earnings on 26 Feb. I think the results will also make the market dance.

• Big boys US and China tariff plays. This is already happening.

• Mag 6 had reported earnings and I think mostly are positive results. This may suggest a good chance for SPX to continue in the bullish direction.

Based on the above situations, I think that uncertainty is high and I wish to build a trade that gives me some protection on the downside and still allows me to collection some premiums if the market continues in the uptrend. So, BWB looks to fit well, if you refer to the option analysis graph beginning of the article. 

Taking care of my risk:

Here are my considerations to take care of my risk:      

• From the daily chart, I have notice that price had bounce up when it touches the 150 moving average on Aug 2024. Hence, I have chosen price 5780, which is the 150 moving average, as the level to watch out.

• I have setup the BWB such that the profits and lost meets at 5780.

• I plan to cut lost if price drops below 5775 (5 points below 5780) before expiry. This looks to be within 1% of my overall portfolio.

• If I stubbornly don’t cut lost, I deserve the MAX LOST of about $4,500.

Technical analysis for PANW

Taking care of my reward:

• I plan to close the trade if I ma$nage to achieve 50% of the premium.

• If price is at 5830 during the week of expiry, I will wish myself “all the best” to hit the jackpot of $5,000 on expiry date. (Btw, 7 Feb was TOTO SGD12 Million Draw. I am lucky to tio $230 [Grin]).

Screenshot of my position captured on 8 Feb 2025

In summary, I had opened a BWB to give me some protection on the downside and at the same time, gives me the opportunity to collect premium if the price goes up.

Comment below if you have any queries. Feel free to share with me if you have a stock in mind and like to use options for your trades. I may write an article of your stock for discussion and education within this community.

@ArcherWG @Aqa @CINDYTAN @DeltaDrift @Dan1192 @jace0777 @Kashcash @KSR @SPACE ROCKET @SPOT_ON @Terra Incognita @ZEROHERO @KL8388

Happy trading 😊.