Netflix, Butterflies,& Option Expiration

JW Jones of Options Trading Signals give us an example of a near-expiration butterfly option trade on Netflix (NFLX) in this free article. Below is an excerpt:

One of the important functional characteristics of option positions in general is the extreme dynamic nature of their profitability. It is for this reason that it is often wise to remove part of a profitable position in order not to suffer economic loss, and, more importantly, the damage to emotional capital from allowing a winning position turning into a loser. 

When considering the dynamic nature of option positions, one of the fastest potential movers is a butterfly at expiration. As the position approaches expiration, the rapid decay of time premium results in extreme sensitivity to price movement. Butterflies turn from gentle creatures lazily flapping their wings in the breeze to man eating dragons as expiration approaches. Be prepared to slay the dragon before he can take your hard earned profits.

I have no position in NFLX



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