I have been watching webinars on butterfly spreads and in addition trading butterflies for about 6 months. Buying a butterfly is easy but exiting a position is rather hard. I have noticed even if my sell price is way below the mid/mark price it still never sells. I get worried about the assignment so once it doesn't fill then I exit one leg at a time, which normally results in a loss. I am drawn to butterflies due to their risk reward ratios but exiting a position has been a problem. Any idea what can I do fix this issue?

Thanks John


1 Answer 1


Stocks whose options are illiquid can be problematic for getting fills at the midpoint or better. This also holds true for any series that is illiquid (deep ITM or far OTM options as well as newly added expiration weeks/months).

There's no way around this because the willingness to split the B/A is a function of liquidity. If it's not there, it's not going to happen.

FWIW, I have found that simple combos are more likely to fill than a multi-legged combo. So if you're adjusting (rolling) one leg of a butterfly, iron condor, etc. via a simple vertical or calendar spread, it's more likely to transact. However, this is nibbling around the edges. It doesn't fix this inherent problem.

If you want liquidity, you need to trade the big names.

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