We're going to put on an income trade in the SPX. This one is a little different because the markets are different.
Here are the current conditions of the market.
1. The trend is up and will most likely grind higher.
2. Implied volatility is low, but still trading at a premium to actual volatility. Because of the "grind" we will most likely keep with low actual volatility, and the odds are low that IV will rise anytime soon.
With those two conditions, an iron butterfly would be a good trade given these conditions.
Here is the trade:
This trade makes money if we stay rangebound or drift higher.
Here is the risk profile:
The goal of this trade is to pull out 15%- 20% of our max risk- so we are looking for a reward of about 1500.
Now this trade will not be a "set and forget" kind of trade. Odds are there will have to be and adjustment, but most likely we will be able to not adjust on this trade for a 2 week period.