Destriero - Butterfly Trades

[easymon1]

If you can call direction correctly, put the fly way out OTM and hit, you get huge payout.

But if direction IS called correctly, what other option plays offer gains of equal or better value than "the fly way out OTM and hit"?

 

[destriero]

But if direction IS called correctly, what other option plays offer gains of equal or better value than "the fly way out OTM and hit"?

Deep OTM verticals will often do better (1x1). Calendars on high skews/low strips. The problem with baby flies deep OTM is that they (can) flip delta.

 

[ironchef]

Deep OTM verticals will often do better (1x1). Calendars on high skews/low strips. The problem with baby flies deep OTM is that they (can) flip delta.

Thank you for helping me out. Actually I didn't know that.

 

[ironchef]

But if direction IS called correctly, what other option plays offer gains of equal or better value than "the fly way out OTM and hit"?

I used to simply traded single leg options. Actually worked quite (reasonably? ) well for me.

 

[.sigma]

Have to disagree on this. Files are cheap on high IV underlyings. If you can call direction, it's cheap leverage.

It’s cheap for a reason lol

read the latter part of my post and you should be in agreement

 

[.sigma]

But when you nail one it's pretty good payout. Played the GME 55-50-45 put fly this week in at $1.50 and out at $3.50. Saved my week for the most part.

S&P

spray and pray, my friend

 

[.sigma]

I think both of you are correct. If your fly setup is fixed body width, very high IV gives you cheaper flies. But high IV with that fixed body width means likely overshoot at expiration and likely will incur a loss.

If you can call direction correctly, put the fly way out OTM and hit, you get huge payout.

Let’s try a fun experiment. Each week we can paper trade some butterflies on one volatile underlying and one nonvolatile one, and trade various flies on both and see how they perform each week.

maybe one fly in SPY, one fly in TSLA or any other volatile stock like a RIOT or GME (as long as strikes are liquid) and another fly in a consolidation stock like a MMM or MCD.

 

[.sigma]

New word: contamination

interesting, Taleb mentions contamination (of convexity) on page 2 of “Dynamic Hedging”

 

[deltaf0rce]

interesting, Taleb mentions contamination (of convexity) on page 2 of “Dynamic Hedging”

That’s a bear of a book. Read about half and tapped out for the short while. Will be back but doing some more fundamental reading prior
Best piece I got from the book, limits when buying gamma and blast the market when selling.

 

[ironchef]

Let’s try a fun experiment. Each week we can paper trade some butterflies on one volatile underlying and one nonvolatile one, and trade various flies on both and see how they perform each week.

maybe one fly in SPY, one fly in TSLA or any other volatile stock like a RIOT or GME (as long as strikes are liquid) and another fly in a consolidation stock like a MMM or MCD.

I like your idea.

However, been there done that. Both my SPY and GILD flies are profitable.

I should try GME next.