High-Yield BWB#
The “Drift” Play - Capture directional drift with improved risk/reward over a standard credit spread.
Overview#
| Attribute | Value |
|---|---|
| Environment | Positive Gamma (Drift) |
| Market Dynamic | Slow Grind Directional |
| Volatility | Low/Medium VIX |
| Primary Goal | Yield Trap - Capture drift with better risk/reward than credit spread |
| Profit Target | Keep the credit if pin/drift occurs |
| Max Loss | Below the “Broken” (Far) wing |
Use when you expect a slow drift toward a level. Better risk/reward than a standard credit spread - if price drifts or pins, you keep the credit. If it drops slightly, you hit the tent (max profit zone).
Structure#
Long Butterfly with Skewed Wings (10/20 Split)
- Buy 1x ITM option
- Sell 2x ATM options
- Buy 1x OTM option (20 pts from ATM vs 10 pts for the ITM leg)
Example (Bullish):
- Buy 1x 6050 Call
- Sell 2x 6060 Calls
- Buy 1x 6080 Call
Entry Criteria#
- Positive Gamma environment confirmed
- Slow directional grind expected (not explosive)
- Net Credit > $1.50
- Clear target level for the drift
Exit Rules#
Profit Target#
- Price drifts up or pins → Keep the credit
- Price drops slightly into the tent → Max profit zone
Stop Loss#
- Price crashes below the “Broken” (Far) wing
- Exit immediately if structure is violated
Management#
Minimal management required. The skew provides natural protection.
The 10/20 split is key. Equal-width butterflies don’t provide the same credit entry or risk profile.