Are these markets giving you trader's block? Maybe you're just too paralyzed to put on a trade? When I used to write fiction, I had days when the words just weren't coming. Yet my writing time was so precious that I couldn't afford to waste any of that time. If the words weren't coming, what could I do to move my writing career forward so that my writing time wasn't wasted?

In those before-Amazon days, I'd pack myself and my children up and we'd head to a bookstore. While my girls were happily choosing books, I was going through a selection of novels, learning from looking. What was the first sentence in each book? I might ask myself in one outing. I'd read as many first sentences as I could. How many plot lines were introduced on the first page? I might ask another time. I'd read as many first pages as I could before my girls were ready to check out. I'd take notes.

Similarly, traders can hone their trading skills while they're wrestling with trader's block, too. We often talk about paper trading, but I'm suggesting something more immediate, something akin to my one-day outings to the book store all those years ago. I'm suggesting that you spend some time with a profit-loss graph or risk graph.

For example, what can you learn about butterflies by playing around with a risk or profit/loss graph?

Expiration Risk Graph for OEX Call Butterfly, Centered at 525, with 25-Point Wings, as of 3/22:

Strategy Summary for Above Butterfly:

Risk Graph for OEX Call Butterfly, Centered at 525, with 30-Point Wings, as of 3/22:

Strategy Summary for Above Graph:

What do we notice when we compare the two butterflies? The one with 25-point wings cost less ("Total Debit" on the Strategy Summary) but has slightly narrower expiration breakevens and slightly lower profit potential. When the profit is measured by percentage of money spent to establish the trade, the narrower butterfly's maximum profit potential is a greater percentage of money spent to establish the trade. It has the potential for a greater yield.

Which trade will benefit more if the OEX's price consolidates while volatilities drop? It looks as if the wider butterfly gains more because its vega is -46.29, meaning it will theoretically gain $46.29 for each 1 percentage point drop in volatility, while the narrower butterfly's vega is -35.54.

Theta, the Greek that measures time decay, is greater with the wider butterfly. Although the number isn't that much larger for a single butterfly than the number for the narrower butterfly, imagine that the position was not a single-contract position but a 10 or even 20-contract position. A positive theta of 201.40 now may seem important when compared to the narrower butterfly's theta of 167.20. All other measures being relatively the same, you're going to gain about $34.20 more a day in time decay on the wider butterfly.

This butterfly was centered at 525, but the OEX was at 527.92 at the time these charts were snapped. What if we had chosen to center the 30-point wing butterfly at 530 instead of 525?

Strategy Summary of OEX Call Butterfly, Centered at 530, with 30-Point Wings, as of 3/22:

When we compare the two strategy summaries of the two butterflies with 30-point wings, one centered at 525 and one at 530, we see that, of course, the butterfly centered at 530 is less bearish than the previous one. How do we know? The delta is -15.36, while the delta of the butterfly centered at 525, with the same 30-point wings, was -24.30. This means that the butterfly centered at 530 is hurt less by a climb in OEX price but also benefits less by a drop in price. It has slightly less theta. Again, the differences don't appear great when we're looking at a single contract, but imagine a 10 or 20-contract position.

The expiration break evens, the points at which some butterfly traders choose to adjust the butterfly, are higher, of course, for the butterfly centered at 530, particularly on the downside. While the butterfly centered at 525 has a downside breakeven ("Lower Protection" on the Summary) at 509.65, the one centered at 530 has one more than the five points higher some might expect. The lower breakeven for the one centered at 530 is at 516.45. The upside breakeven, however, is less than five points higher than for the one centered at 525.

I'm no expert in butterflies, but even I know a few things about them. While we try not to have a directional bias on butterflies, we know that their expiration breakevens can tend to be near or slightly outside a one-standard deviation move. Because of this, their adjustment points can be a little tighter than those in iron condors, and they're more likely to need adjustment sometime during the trade than a high-probability iron condor might, for example. While we might not want to take a big directional bet, we might want to ask ourselves some questions about where we think the OEX might be going when we study the sample graphs and strategy summaries. The OEX's position between the two strikes requires us to make decisions about how we'd like those Greeks and breakevens to look.

Did you think I was going to tell you at the end of this article which butterfly was best or whether the timing was even right for butterflies? I'm not going to do that because there's no best, no one right way to do it, and I didn't have a crystal ball on 3/22 to tell you what I thought would happen to volatilities, either. You just have to ask yourself some questions when you're playing around with these graphs, such as would you prefer to exchange lower initial cost for a greater likelihood that the trade will need adjusting since it has narrower or closer-together expiration breakevens?

The games you play to break that trader's block and utilize your trading time productively don't stop there. What happens if the OEX climbs sharply, so sharply that volatilities rise rather than retreat? That's a rare occurrence, but it's happened a few times lately, so it's good to run such a scenario through a risk-analysis graph to see what happens. What if that event occurs two days after the trade is entered? Running the trade through a risk graph on March 22 provided the following theoretical values. It showed that if the OEX climbed to 536 by March 24, which it did do, with volatility rising 2 percent, the 30-point wide butterfly centered at 525 would theoretically be down $355.00 or 7.95 percent, while if volatility had remained the same, the loss would have been $258.02 or 57.78 percent.

This week, however, as the OEX was first rising to 536 on March 23, volatilities were dropping as they usually do when prices rise and not either rising or staying static. Unfortunately, I did not check the prices on that day. Think-or-swim's Thinkback feature gave me a theoretical price of $13.30 (or $1330 for the contract) on March 23 for that butterfly centered at 525 with 30-point wings, when the OEX was at 536.97. Since the debit suggested on March 22 was $1465, that represents a theoretical loss of $1465 - $1330 = $135. In this case, the delta-related loss was theoretically offset by the volatility-related gain.

Run some of these scenarios through a risk or profit-loss graph. I've used a freeware program for these graphs, but many online brokerages will offer some sort of profit-loss graph. If those aren't offered, use an options calculator to calculate the price of the various options under different scenarios. You don't have to feel that a day or week or month of trader's block is time lost in honing your skills. In fact, it may be the best trading experience you can gain.