Broken Wing Butterfly
Scan ranked BWB candidates with payoff, edge verdict, Greeks
Volatility OSP playbook — what to look for & live signal measured
Profit mechanism. Broken-wing butterfly (long 1 / short 2 / long 1, far wing wider), single-expiry, NET CREDIT, with a long far tail-hedge leg. A short-volatility / variance-risk-premium harvest.
Look for:
- net_credit (hard floor) + credit_quality = credit/widest-gap
- iv_vs_rv: short-leg IV / realized-vol ratio above threshold
- breakeven distance ≥ ~1 EM; momentum_fit (avoid 20d highs/lows, BB edges)
- Double-BWB only inside the Bollinger bands
Edge / reality: Sells rich IV vs realized vol (variance-risk premium) + skew, defined tail. MEASURED: selling when IV is elevated (VIX≥18) earns a VRP of +4.9vp — richer than the +3.6vp all-days baseline — and pays on 83% of days, with a ~5% vol-spike risk. The 'sell elevated IV' signal is real.
Live-signal caveat: VRP measured (index +4.9vp + per-strike IV ~1.15× realized). BUT the leave-out test flags it as the LEAST robust edge — VRP is EVENT-CONCENTRATED (SPY negative all 3 years 2024-26; SPX/IWM flip negative in some years). Size small; it is not an every-year edge.
reading live VIX term structure…
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