Are lottery Butterflies worth it?

[Ironplates]

has anyone done any study or had experience using deep out of the money Call or Put Butterflies.

ie. a May 31 SPX
5600/5800/6000 Call Fly for $.85 where if it expires near 5800 is near $200.

on a closer DTE, the strategy is in increasing return on win rate.
ie. all those credit spread trades of .20 delta. for those few times the credit spread gets wiped, you end up picking up nickels in front of a freight train.

what if you just buy the spreads and benefit from the un expected move. or does that just break even just the same? has anyone found a positive EV to the strategy. i mean if it blows up the credit spread side, why not just do the opposite?

 

[taowave]

Why dont you look at some programs that can determine if your selected trade has theoretical edge and what the win rate is ??

has anyone done any study or had experience using deep out of the money Call or Put Butterflies.

ie. a May 31 SPX
5600/5800/6000 Call Fly for $.85 where if it expires near 5800 is near $200.

on a closer DTE, the strategy is in increasing return on win rate.
ie. all those credit spread trades of .20 delta. for those few times the credit spread gets wiped, you end up picking up nickels in front of a freight train.

what if you just buy the spreads and benefit from the un expected move. or does that just break even just the same? has anyone found a positive EV to the strategy. i mean if it blows up the credit spread side, why not just do the opposite?

 

[2rosy]

why do this as a fly? aren't you buying 6000 strike for no reason? just buy otm option or a 1x2

 

[Scataphagos]

Here's a concept for you. While your win percentage may be high, the best you can make with "hedge/offsetting" risk stragegies is a small amount on each play. You may have a high percentage win rate. You may also have large positions to try to capture a large number of small gains. But the fact remains... to make BIG gains, you have to make large, unhedged bets and be correct.

 

[taowave]

He doing the opposite and basically buying cheap lottery tickets with low win rates..
My question is it it worth selling the upper vertical or is he better turning it into a split strike fly and selling a wider one..What has the most edge??

"Scataphagos, post: 5904281, member: 140770"]Here's a concept for you. While your win percentage may be high, the best you can make with "hedge/offsetting" risk stragegies is a small amount on each play. You may have a high percentage win rate. You may also have large positions to try to capture a large number of small gains. But the fact remains... to make BIG gains, you have to make large, unhedged bets and be correct.

 

[Ironplates]

why do this as a fly? aren't you buying 6000 strike for no reason? just buy otm option or a 1x2

i dont have the margin to be short the 2x and the having the other leg does not cost that much anyway. its even best if its a 200 wide x 100 wide on the backend.

 

[zghorner]

just buy otm FDs if you want to gamble.

 

[Ironplates]

He doing the opposite and basically buying cheap lottery tickets with low win rates..
My question is it it worth selling the upper vertical or is he better turning it into a split strike fly and selling a wider one..What has the most edge??

i believe price contracts and expands. the split strikes could work for contractions, but not as well for expansions.

 

[Ironplates]

Why dont you look at some programs that can determine if your selected trade has theoretical edge and what the win rate is ??

what kind of programs could do this?

 

[newwurldmn]

What has the most edge??

The structure where you sell 2x at 10 vol!