I’ve put on a variant of the M3 which is started a bit farther out in DTE (usually 77 days till expiry). It’s the same concept as an M3 except it utilizes a broken wing butterfly instead of a call. The trade is a bit more rule based as well. I’ll be entering a normal M3 around 67 DTE and an M3 Rhino about 77 DTE and I’ll be closing them around 21 DTE to avoid gamma issues and to make trading much easier especially in a large account.
You can see the risk profile is almost identical to the original M3. The management is slightly different though. On the upside we use call calendars and call BFs and on the downside we simply roll the BFs back.
I’m expecting to have much more consistent results going forward with these further out DTE trades. They won’t be glamourous but they’ll be stable and consistent with lot less stress. I trade a big account and managing several theta based trades 7-10 DTE is challenging and I am tired of it.
Oh: Kudo’s to Brian Larson for creating this trade variant of the M3.
