(1). What's the plan /setup if market had a bid move (e.g.,) crash, do you use a stop?
(2). What's the strategy for position size? e.g., when is a setup/good time/market condition to enter 2nd position of trade?
I am going to answer your questions in combination since I think they are related.


The (iron)butterfly and the time-spreads (calendar) are risk defined trades. When you enter them you know the maximum exposure. A market gap way beyond nightmares can only create a loss close the the maximum exposure. So in the lazy accounts I have an exposure of approx 20%-25% of my capital. In these accounts total loss is very painful, but it will not get me out of the 'game'. Since only using 25% of the account for this strategy, my average return on risk (20%) becomes 5% per month on account. A total (overnight) market crash will cost me five months of work to get back to the old levels. Again painful but not hopeless for the darkest of all scenarios.

A strongly trending market uni-directional market can be trade with more easily with this strategy, by continuously moving the center of the trade. I keep an eye on the VIX, as explained in an earlier post, when the vix is signaling storm warning, I start reducing risk and every adjustment will get me closer to flat. As long as the VIX is giving me an indication this "transitory" (sorry Sunday morning joke") I am willing to add to my position with a extra fly at the current ATM or centered a bit opportunistically towards the direction of the trend.
To get you to question of timing, that is probably the most difficult part of this trade style, to early hurts the results, as much as too late. You can not let lose get so big that you need to stop by pull the emergency break. As said in an early post before the close of everyday I run some what if scenarios. What if tomorrow we go 2sd up, what if we go 2sd down. What if the VIX spikes a couple of points. Does any of these scenario get me past the point of max loss. If so then I need to act now, because I need to work with the assumption that they could happen tomorrow.
Over time experience (read past errors) will teach you when you can be opportunistic at accept a bit more risk, and when to be careful and reduce your risk strongly.

When the market has big moves in both direction, and we visit both opex break even in a couple of weeks, then this strategy becomes difficult to trade.

You will need to keep book and monitor your P/L closely, since long term success depends strongly on two factors;
1. How many months per year can you make it to work,
2. How much do you give back when it doesn't

In a 'normal' month were this strategy doesn't work you should not lose more than once to max twice your normal intake. In my trading plans I estimate the fly works 10 out of 12 months. I lose in total 3 months of capital in the months it doesn't work, and I have one month of profits going towards commissions. Leaving me with net. 6 months of returns. 6 times 5% is 30% (uncompounded).

The above is description how I look at my lazy accounts. I have one more active account, in this account my risk is bigger, ergo I have more fly and a risk above the max 25%. In this account I own some leap SPY puts. I use to own the 2012 125 put, I rolled them to the 135 when 2013 became available. This a losing position for me, which is okay since it has the function of portfolio insurance. It roughly brings my risk back the desired 25%, while at the same time I am able to trade a larger size fly. In my before the close exercise I will beta weight all my delta towards the SPX and consider my risk on account level.

PX, hope this answers your question,

Ernst