When it comes to income strategies, finding trades with a solid reward-to-risk ratio is a rare feat.
But the butterfly options strategy delivers just that. During a recent masterclass, I used Estee Lauder (EL) as an example because it demonstrates why this approach is a standout for traders looking to generate consistent weekend income with limited downside.
One of the key strengths of the butterfly strategy is its ability to achieve a 1-to-1 reward-to-risk ratio with the right stock, as we will see here with the EL example. Here, the maximum potential profit is $250, and the maximum potential loss is also $250, that 1-to-1 ratio I just mentioned.
This symmetry is hard to find in most income-focused trades, especially when you factor in the high probability of success inherent to the butterfly setup.
Why is this ratio so significant?
It provides clarity. You know upfront exactly how much you stand to gain versus how much you’re risking. There’s no guessing game — no need to wonder if a sudden move will blow up your account.
With a butterfly, you’re in control from the start.
Another feature that makes the butterfly strategy appealing is the range of movement within which the trade remains profitable. In our Estee Lauder example at that time, the break-even points were at $62.50 and $67.50.
That’s a comfortable range for the stock to move while keeping the trade in the green.
Even if Estee Lauder strayed outside this range, losses would have remained relatively small unless it broke completely out of the $60 to $70 range. And for the trade to hit maximum loss, the stock would have needed to make an extraordinary move — something that was highly unlikely given its sideways price action at the time.
The beauty of this strategy lies in how it aligns with a short holding period.
By setting up these trades on Thursday and closing them the following Monday, you can reduce your exposure to market unpredictability. This timing minimizes the chances of a significant price move that could threaten the trade’s profitability.
The butterfly’s defined risk and controlled exposure make it a powerful tool for generating reliable weekend income. While no strategy is without risk — and black swan events can happen — the butterfly offers enough flexibility to weather most market conditions while still delivering consistent results.
When executed with proper position sizing and discipline, the butterfly strategy provides traders with an opportunity to generate consistent income while maintaining tight control over potential losses. Its ability to deliver a 1-to-1 reward-to-risk ratio with the right stocks, along with a wide profit zone, makes it an ideal fit for weekend trades.
If you’re serious about income trading, mastering the butterfly strategy could be a great tool in your arsenal. Set your trades on Thursday, monitor them briefly, and let the strategy work its magic.
Like with anything in trading, it does not come without some risk. But it is simple, effective and reliable — that’s what the butterfly is all about.
If you’d like to learn more about how I make these trades, check out my Weekend Trading Club!
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Stop Letting Profitless Weekends Pass By
Most traders accept weekends as dead trading days.
Saturday and Sunday? Zero profits. Nothing happening… no opportunities.
But what if I told you these “dead days” could fetch you extra income from the market without needing to do any extra work at all?
According to our backtesting…
Back on April 25, anyone who knew about this method of targeting extra income during the weekends could have taken 2 minutes to place a trade Friday…
Head out camping, golfing, to the movies or whatever you like to do for the weekend…
And on Monday morning, wake up to an extra $917.
Sure enough the next weekend, May 2 rolls around…
Place another quick setup before the weekend… book that favorite bed and breakfast…
Wake up on Monday to an extra $1,852 waiting to be claimed.
Granted, there would have been smaller wins and those that did not work out, but while others watch their accounts sit idle Saturday and Sunday, you could be targeting an extra $915 on average — all without touching a single share of stock.
The profits and performance shown are not typical, we make no future earnings claims, and you may lose money. The trades expressed are from historical data in order to demonstrate the potential of the system.
