Bearish Butterfly tip:
Here’s an interesting tip that may help fellow BB traders out there. For the record, this is not my idea. It’s from Kas who is a member of the forum. Thanks, Kas. For those who don’t know him. He trades the BB, lives in Calgary but hates snow. You’ll find him in Latin America 4 months of the year.
The idea: For the “back of the napkin” price range calculation for the RUT upon entering a BB trade, use the Rule of 20. As Kas mentioned to us in the Calgary Meetup group, if the price is $10 for example. Subtract from 20 and add a zero. That will get you in the ballpark as to how much price movement the trade can “bear” going forward. So, $10 = 100 points, $8 = 120 points, etc. I like it!