The 100% Risk-Free Options Strategy (4 Easy Steps)

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Generally, when it comes to trading Options, it's impossible to have a strategy that has absolutely no risk.

However, there is ONE strategy that if certain conditions are met can actually become a 100% risk-free strategy.

And the best part is that it's 100% legit and can be done by anyone.

So what's this 100% risk-free strategy?

I reveal exactly what it is and how to set it up in this video...

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[linda-elkg]

I've been doing this for awhile now especially since the market has been going up. I like how I can free up my buying power and still have an opportunity to profit on the trade with no risk. Excellent explanation, thanks Davis!

[rajivbagai]

Great video!! I have very limited experience with spreads, but have 2 quick questions: (1) Won't it be better to trade all 4 legs on one trade ticket in order to avoid getting stuck with a put ratio spread, in case the caterpillar is unable to become a butterfly?, and (2) How about choosing strike prices such that the current market price is already inside the tent, preferably at the tent's center?

[cancanturco]

Isn't is less risky to place a Credit Vertical and then a Debit Vertical? You can convert them into a BFly once the Debit Vertical gets filled, right?

[sebabuongiorno]

Your content is excellent. In the event that it exceeds the strike of the 2 sell positions, would it be assigned with the risk of the 200 positions?

[gerardbroussard]

Very clever, Davis. This approach would likely work best in a neutral range bound marketplace where price is rising and falling but trending sideways over time. If the market is trending up there would be little issue buying the second long put below the credit from the ratio spread but the chances of price falling under the profit tent would be low. In a bearish market it might be challenging to buy the second put below ratio spread credit since that put value would be inflated, as you mentioned. What has been your experience/success in buying the put =< the credit received? How long did it take for the put order to fill after you purchase the credit spread? Thanks for an excellent video.

[fatcat]

Hi Davis, is a put butterfly spread similar to a call butterfly spread. Meaning to say, sell a call ratio credit spread and then buy a further OTM call of equi distance between the call credit ratio spread width ?

[alloymobile]

I like your good thoughts but when you setup the trade the final buy where we have to buy in limit market price is always more than your limit. We have to wait for the decay for that limit leaving the trade in 100 pct risky. And if there is a sudden opposite move you will not get a chance to reach that limit price.

[peiheng]

one of the reasons that People used short butterfly strategy is the margin, because it use less fund to leverage higher profit. However if I split two phase to setup this strategy, it means I have to prepare higher margin in the account, cuz I have to short 2 put and buy 1 put, which is not comfortable for small account.

[alexpoon]

Hi David, what expiration days we choose, is it 45 days
Can we trade weekly options? Thanks

[commonwealth]

Thanks for nice explanation. One questiob, when should I close this butterfly?

[alexpoon]

Am I right to say in order to construct risk free butterfly, once you obtain put ratio spread for a credit, the market needs to move up first so that the long put value will decrease less than the credit received, then we buy the long put.
Once we have risk free butterfly, we hope the market move down into the tent for more profit

[rajeshgarg]

You should buy 195 strike price of next month also you should buy 187 strike price of same month after selling 2 lot of 190 then as market goes to 187 then you will not have loss but if market goes to 195 then also you have premium left due to next month expiry.

[redexit]

Thank you for sharing your investment strategy. What would be the opposite if the market is going down. -buy a put and sell a call spread?..

[mandyll]

A really clever strategy! So if I understand this correctly, does it mean it's possible to build multiple of these risk free butterflies one by one over time as a hedge if the market goes down, and it doesn't take up any buying power?

[tusharshah]

Thanks for the wonderful strategy if you can show a live working example with differnet price stock up and dowm and capture that will be helpful to visualize

[sbala]

How do you select stock for this strategy? Do you have any scanner or filter?

[SatyaThiru]

When I placed this order with Robinhood, I got an error message saying that: "order premium must be less than the collateral". Does it mean I need to have buying power for the two buy puts?

[williamkloss]

Great concept. How do you find these opportunities? Do you suggest a scanner?

[ncky]

Can you buy multiple contracts each leg to 10x everything (providing you can leg in)?

[jaynen]

Hey Davis, thanks for your video one question I would ask for you is, how can you get fill for these type an order especially on the sell, because if closed as a spread all legs need to qualify as a single transaction. "Do you have a spread or multi-leg options order entered at the nat price that is not filling? If so, you're not going crazy. When it comes to an order fill, spreads are unique, because the entire order (all the legs) must fill at ONE exchange. To understand this, you have to know how options quotes work. In the world of option quotes, the best quote must display. That means the highest bid price and the lowest ask price will list as the quote from all exchanges. This quote system is commonly known as the National Best Bid and Offer (NBBO). "