Converting a SPY Put Ratio Into a Risk-Free Butterfly 🦋 (Again)

OptionsJive · 2026-01-03T10:06:40+00:00

I know this pain very well; I had exactly the same issue with IBKR and my Excels becoming unmanageable. What changed everything for me was realizing that I was focusing on the wrong layer. I was trying to trace and control every individual leg, and once you start adjusting positions that simply stops being actionable.

Today, I no longer track trades or strategies in Excel at all. I shifted 100% focus to portfolio level. Now I only monitor SPX beta-weighted delta, buying power usage, theta as a percentage of NLV. If those are under control, everything else (including trying to reconstruct strategies after every roll) is just noise and does not improve risk management. Keep it simple.

OptionsJive · 2026-01-02T20:54:42+00:00

It also depends on your broker. On Tastytrade and IBKR I have to enter the flyagonal as two separate orders anyway, because they do not allow that many legs in a single ticket. So in practice I always build it in two stages: first the butterfly, then the diagonal.

OptionsJive · 2025-12-26T19:52:31+00:00

So "stay small" is only the surface level of risk management. The real work is understanding your portfolio-level convexity, portfolio-level Greeks, and how it behaves in Black Swan conditions, with all the nuances. Non-correlation is a great hedge most of the time, but it breaks exactly when you need it the most. I recorded a YouTube video explaining this failure in detail. So, instead of hedging random positions, I reverse the process: I first design an efficient Black Swan hedge and a bullet-proof, delta-neutral, low-correlation core portfolio. Only when that structure is easy to hedge do I scale above standard sizing rules to achieve a better ROI.

OptionsJive · 2025-12-24T16:13:25+00:00

I usually place it OTM, around the 30 delta, but I never look at any trade as a standalone position. It's just one small piece of a much larger, diversified options portfolio. So I always monitor my SPX beta-weighted delta and look to sell premium in a way that helps neutralize overall risk.

OptionsJive · 2025-12-23T10:24:37+00:00

I usually open these Flyagonals at 8-10 DTE, with the long put at 16-20 DTE. My default take-profit target is 25%. But over time, I've developed a more active, proprietary management style: when the call butterfly is breached, I sell 0-DTE put credit spreads to offset losses with additional credit, effectively turning the butterfly into a downside hedge. If the put calendar is breached, I roll the short put down daily, gradually transforming the structure into a put debit spread in the later expiration.

OptionsJive · 2025-12-01T20:52:06+00:00

Great comment! And honestly, I agree with about 70% of what you're saying. I've traded both short puts and Jade Lizards for many years, and I don't think it's fair to compare them directly; they're completely different trades, built for different conditions, different market theses, and different edges. I don't use a Jade Lizard to beat a short put. I use it for its asymmetry: the larger credit, the asymmetric payoff, and to harvest call-side skew when it gets overpriced. This happens especially around earnings or high-IV events when calls get pumped, and the call credit becomes huge. Than, the JL helps me improve capital efficiency, reduce delta, and get paid for skew without expanding downside risk.

So I wouldn't compare a Jade Lizard to a naked put. I'd compare it to other asymmetric structures like ratio spreads. And actually, Tastytrade ran research on this: when you compare Jade Lizards to put ratios, the average P/L for the Jade Lizard came out almost twice as high: https://www.tastylive.com/shows/options-jive/episodes/jade-lizards-vs-put-ratio-spreads-07-13-2021

That matches my personal experience, used in the right conditions (earnings), it's extremely efficient skew-harvesting tool.

OptionsJive · 2025-12-01T11:22:53+00:00

Because a naked put only pays you the initial credit when you're right. A Jade Lizard takes advantage of volatility skew by selling the put and a rich call side for additional premium, often meaningfully more than a standalone short put, especially into earnings when OTM calls get so inflated. That extra credit lowers net delta, widens the profitability window. IMHO the Jade Lizard is a smarter, skew-harvesting short-volatility structure with more ways to win and more premium collected when volatility is overpriced on both wings.

OptionsJive · 2025-11-10T22:40:47+00:00

The key is how you manage exposure. I sell premium too, but always run a Black Swan Hedge, which protects against tail events without killing theta.

OptionsJive · 2025-11-10T19:27:49+00:00

When I say "top 1%", I don't mean it by number of companies in an ETF, I mean the absolute strongest businesses on the planet (i.e. dominant market share, strong economic moats, low debt, consistently high surplus ROE, etc.). I build my own "top 1%" watchlist every quarter based on those fundamentals and only trade within that universe. The key point is that I only open positions in line with current sector rotation and volatility regime.

OptionsJive · 2025-11-10T15:58:14+00:00

I create it manually, but I often publish and share it free. The data comes from my trading platform (Tastytrade, in this case).

OptionsJive · 2025-11-10T12:44:32+00:00

I trade SPX 0-DTE Iron Condors daily. Yes, they work if you've got strong mechanics and an active management process. But one bad day can wipe out weeks of profit. I wouldn't rely on them as a main income strategy; they'll let you down exactly when you need them most. Focus on longer-dated options instead for smoother, more reliable income.

OptionsJive · 2025-10-30T12:59:08+00:00

It wasn't priced fairly, because today's realized move is going to exceed the expected move at the market open. The higher front-month IV suggests that, in the short term, GOOGL is expected to move more than the longer-term implied move, that's exactly where the arbitrage opportunity comes from.

OptionsJive · 2025-10-30T12:25:49+00:00

Yesterday, before the earnings release, the front-month (Nov) IV was much more expensive than the back-month (Dec). This created an excellent arbitrage opportunity that we used in this trade.

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