Another in the series of broken wing iron butterflies that runs on 0 DTE. I do have a theory for another use case around earnings, IVR and IV crush. If those go well I’ll update update it on this thread. This will be a good week to test it.
I built this bot very quickly, let it run against my other bots and didn’t pay much attention to it. It was just sitting there bouncing along then in early July I noticed a big spike up. Dove into it a bit more, tweaked a couple things here and there and it’s done very well since then.
The bot opens up two broken wing iron butterflies. One is bullish and one is bearish.
Bullish strikes are: short positions are at the money, long call delta is .35, long put is -.10.
Bearish strikes are: short positions are at the money, long call delta is .10, long put is -.35.
Similar to the “Learn to Fly” bot this will cut a position loose if the market is moving hard in one direction or the other. For the bearish position if the short call leg is greater than .68, then the position is closed. For the bullish position if the short call legs is less than -.68, then the position is closed.
When one position is losing then the second position should be well in the money. Once the bot has only one position left then a tight closer kicks in: Position trails a 5% target by 4%. This is in case the market swings the other way then your capital is protected. Basically you live to fight another day.
The market has been extremely choppy the past few months and 0DTE bats notably have huge drawdowns. What caught my eye is how little drawdown there has been. Only 6.9% since May. Of course this has only been paper trading…
My take is the bot basically trades up a little, down a little, then has a huge spike when the market closes about where it opens. This happened today, which dwarfs the spike I saw in early July which initially caught my eye.
Like I said earlier I have some ideas about using this about earnings and IV crush which I think this bot can be easily adapted to and will update if I find anything noteworthy.