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You ever put on a trade, watch it move against you and think, “Man, I wish I had a Plan B?”
Yeah, me too. That’s why I started building one into my butterfly breakout trades.
I call it the “hamburger hedge” — and yes, I know that sounds ridiculous. But the structure is actually pretty elegant.
You take a butterfly breakout trade, then if price moves away from your original position, you put fewer contracts on a wider version of that same spread.
You’re not just hoping the first trade works. You’re adding protection as the market moves and creating another potential path to profit.
The Original Butterfly Setup
I put on 15 contracts of a breakout butterfly at 10:30 a.m. ET and collected 45 cents in credit. We always go five points wide on these — it’s a high-probability, negative risk-reward strategy.
The trade was simple: I needed the S&P 500 Index (SPX) to finish cleanly outside the 7,675 strike level to win. As the market started crashing nine points lower, I thought I was golden.
But breakout trades aren’t just about one line on a chart. If price breaks through a key level, I start looking toward the next lower level.
If it merely touches and holds, the market may center back around the prior range. That distinction helps determine whether I sit tight or add protection.
Average true range also gives the setup context. With the Nasdaq 100 (QQQ), for example, the question is whether we can target a move smaller than its average daily range while still creating 60% or 70% potential return on risk. We’re asking the market for less than it typically moves, not demanding a miracle.
In this case, price moved far away from my zone. That’s when I put on the hedge.
The Hedge That Filled Late
I added three contracts, compared with my original 15, on a version of the spread that was five points wider. If price came back into the original zone, I’d have protection. Every once in a while, both sides can win.
The hedge didn’t fill where I expected. Instead, it filled at 3:48 p.m. when price was about 20 points higher than the area I’d been watching.
So now I’m thinking, “Wait, did my hedge even fill? What’s my net P&L here?” Meanwhile, the guys are heckling me about losers and giving me grief — all in good fun, but it captures how trading actually feels when the numbers aren’t behaving as expected.
There’s another wrinkle with SPX options: The chart and the official settlement value don’t always agree.
With an AM-settled spread, a position that appears to have expired safely above a line can settle 12 or 14 points away from the chart’s apparent close. A trade that looks like a winner may not be one once the official settlement arrives.
That’s why the key is having a plan. Fills can come late, settlement can surprise you and price rarely behaves perfectly.
The hamburger hedge gives me another way to manage that uncertainty instead of simply hoping.
Nate Tucci
Tucci Trades
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
