231 Butterflies

[ironchef]

But this is such a narrow profit range. How can I guess where the stock will end up?
And also how can I set the fly such as it's delta neutral where I want it? The non active fly in the simulation is quite on the other side, but delta is pretty much the same as for the active one: -2.75 vs -2.39.

1. Your brokerage should be able to total up all the deltas, theta, gamma, vega... so you can find a set up that is delta neutral?

2. That is why in addition to des's coaching, EOC's post is so important to me:

This was all the edge I ever needed to make money, analyze the chart, strikes and expiration to find the position that best suited my view and lock it in. Best thing about the analyzer is I can tweak the strikes until I feel comfortable with it while visualizing the greeks a bit.

Here is my plan:

I will download the option chains from my broker, play with the combination in Excel VBA and find one that fits my opinion.

I don't think there is any free lunch for us retails, we still need to have the correct opinion to make money.

To those who were willing to post and explain, I owe you big time. Thank you.

Best wishes to you Corto.

 

[Corto]

...

Here is my plan:

...

To those who were willing to post and explain, I owe you big time. Thank you.

...

Then there is hope...

Being right about direction matters for almost everything. Is this fly less picky about it?
Shooting for max profit is a "good luck with that" situation. So I guess it's assumed to be closed early.

 

[El OchoCinco]

There is no magic system that spts out FLY strikes and expirations to blindly put on. You look at the underlyiung chart, the option chain vols, the risk/reward profile modelled and you pick the trade. Each step requires a lot of work and experience.

 

[destriero]

Right, I don't even know where to start. I mentioned in another post to this you need to model your forward curve in the process. There are a lot of moving parts. You have a vol-line and gamma model to arrive at a fair value based upon underlying price and volatility expectations.

You don't throw on some ATM flies indiscriminately. I've stated 100x that it's a structure, not an edge.

I am not going into further detail. Sorry, but I've already outlined it.

 

[Corto]

My direction assumptions come from interpretation of the chart. Good or bad at it, this is all I know. Can volatility and gamma somehow come in support or contradiction of my assumption and only enter the trade if they align well (not sure exactly what this means)?

 

[destriero]

My direction assumptions come from interpretation of the chart. Good or bad at it, this is all I know. Can volatility and gamma somehow come in support or contradiction of my assumption and only enter the trade if they align well (not sure exactly what this means)?

I can't help you, sorry.

 

[ironchef]

Then there is hope...

Being right about direction matters for almost everything. Is this fly less picky about it?
Shooting for max profit is a "good luck with that" situation. So I guess it's assumed to be closed early.

Let me give you my comments and I am done too:

1. I think the simpler the system the less picky it is. Trading the underlying is less picky than trading single leg options which is less picky than spread which is less picky than fly. Think about this, underlying you can wait it out, options you have to guess the direction, magnitude and duration to make money. For a fly, I don't even want to speculate.

2. Longer expiration tends to be less picky, so swing trade is less picky than day trade. But too long an expiration is expensive and hard to manage so there is a sweet spot. When I started trading single legs, I struggled, then one kind poster (drcha) advised me to lengthen my expiration a little because she said shorter time frame tended to be noisier. That made a world of difference for me.

Good luck.