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[PaceAdvantage]

Like him, I buy calls (IWM calls, not RUT), not outright shares of the ETF (IWM is the ETF for the Russell). It achieves the same purpose of getting me to delta neutral and keeps everything in options. If you are trading multiple lots of these butterfly spreads, then you'd probably want to look at buying the RUT calls instead of the IWM calls....a RUT call would be too much though if you're only trading a "one lot" of these spreads...the IWM is smaller in size and works much better when you're only trading one or two lots of these things.

The long put butterfly is a net debit trade. You're buying the trade, not selling it (thus you don't get the credit deposited to your account when you open the trade like you do when you sell a credit spread). However, it is a theta positive trade (or at least your goal is to keep it a theta positive trade), so it acts much in the same way as if you were selling a credit spread. I don't know enough to explain why...I just know it is...

That spread you posted looks about right in terms of max profit/max loss. If your trading platform does not support you putting in butterfly orders (ie. you have to buy each individual leg of the spread and cobble it together yourself), then I would not be trading this system, or spreads in general. Find a broker/platform that lets you enter a single order for the entire spread at once, and executes the whole thing at once. I currently use thinkorswim...but I am still in the early stages of this. If I choose to get serious, I will find another broker with more favorable commissions.

With that said, the thinkorswim options platform at TDAmeritrade is an excellent piece of software for the options newbie...

I would also check out tastytrade.com. Their videos and streaming live shows can teach you a lot.

And again, I haven't paid Mr. Locke one cent...I got everything I basically needed off the video to get rolling with this...and I have rarely had to adjust...what he's doing in the video is NOT the original M3 trading plan. I am trying to duplicate the original M3 plan...I think he outlines the rules of the original M3 plan in the video early on (I believe there is a single slide in the presentation that has all of the rules...there aren't many rules), but what you see him trading through the rest of the video is NOT the original M3. He adjusts a LOT in the video...not sure if it's because of the trading environment he was in at the time (probably), or if his modifications over the years have led to more adjustments...but keep in mind what you see him doing in the video is NOT the original M3.

The original M3 is a simpler plan...and one that seems to agree with me thus far...