Yesterday, I have opened a butterfly for September 2015 expiration. The strike price for the straddle is 3,550 points. The insurance is a one month out long put for July on 3,100. The premium earned is 2,957 Euro after commissions. The break even points are 3,845 and 3,254 points.
Reason for the trade was the strong opening gap of more than 1,500 points after friday closing price of 3,450. The result is a huge volatility of 28 points in VSTOXX. I expect the EuroStoxx 50 to calm down after a few day leaving me with a high premium and buffer.
Adjustments have to be made if the index rises above 3,750 points. Then a new straddle on that level for September will be sold.
The reason I don't buy a long call on the upper level is the strategy to extend the trading range with new straddles. The long put will always be bought for one month expiration. The only goal is to insure huge market drops that could wipe out the portfolio. If the index will decline slowly, the range will be adjusted with new straddles at 3,350 points.