Skip Strike Butterfly

Because one or more strikes are 'skipped' between the body (short strikes) and the wings (long strikes). In a standard butterfly, wings are at the next available strikes. In a skip, you skip over one or more strikes to place the wings further away.

Neither is universally 'better.' Standard butterfly offers higher max profit if the exact pin occurs. Skip butterfly offers higher probability by having a wider profit zone. Choose based on your conviction: exact price → standard, price range → skip.

At least 5 strikes: 2 for wings, 2 for body (center), and 1 to skip. For example: 7400 (wing), [7450 skipped], 7500 (body), [7550 skipped], 7600 (wing). With only 3 strikes available, you can only do standard butterfly.

Not always. Put or call butterflies usually enter for a debit. But iron skip butterflies (combining puts and calls) often enter for a net CREDIT because you're selling an ATM straddle and buying a cheaper OTM strangle.

Risk is defined (capped). For debit butterflies, max loss is the debit paid. For iron butterflies (credit), max loss is wing width minus credit. You cannot lose more than the maximum, making risk management straightforward.

1-strike skip: Moderate profit zone, balanced risk/reward, good for normal conditions. 2-strike skip: Wider profit zone, lower max profit percentage, better when less certain of exact range. Consider XVI level and your confidence in the settling zone.

Use asymmetric skip when you have a mild directional bias but still expect settling near center. Bullish? Wider skip on put side. Bearish? Wider skip on call side. Keep the asymmetry moderate - extreme asymmetry is essentially a broken-wing butterfly.

Gamma increases as expiration approaches, especially near center strike. High gamma means small price moves cause large P&L swings. Most traders close skip butterflies at 7-14 DTE to avoid extreme gamma risk, even if not at full profit target.

Generally no. While max profit is appealing, gamma risk in the final days is extreme. A small move can quickly turn max profit into significant loss. Most experts recommend closing at 50-75% profit or 7-14 DTE, whichever comes first.

Iron condors typically have higher expected value due to wider profit zones and higher win rates. Skip butterflies have higher potential profit but lower probability. For consistent income, IC is usually better. For opportunistic higher returns when expecting pinning, skip butterfly may outperform.

In moderate XVI (18-22%), use 40-50% skip ratio. In elevated XVI (22-28%), can extend to 50-60%. In extreme XVI (>28%), consider wider skips or IC instead. The optimal ratio achieves breakevens outside 0.75 SD of expected move.

Check IV at each strike. Put wings often have higher IV (skew). If put wing IV is significantly elevated, the asymmetric pricing can be exploited by slightly asymmetric structure - wider skip on put side collects more premium per point.

Options: (1) Roll threatened wing further out (costs debit but extends room), (2) Close entire position (accept outcome), (3) Convert to iron condor by adding spread on threatened side, (4) Shift entire position to new center at current price. Choice depends on market view and remaining time.

Systematic approach: Enter when XVI 20-28% and underlying centered in expected range. Exit at 50% profit or 14 DTE. Allocation: 20-30% of theta portfolio. Expectation: 55-60% win rate, 9-12% annual return on allocation, Sharpe ~0.9-1.1.

Technically yes, but not recommended. Butterflies are theta strategies benefiting from time passage. Intraday, theta is minimal. The edge comes from capturing time decay over days/weeks. Intraday butterfly trading is essentially directional speculation on the structure.