you're right.. I was assuming we were talking ATM flies since thats the "standard". But we can get into OTM flies!
Destriero - Butterfly Trades
- Thread starter ironchef
- Start date
you're right.. I was assuming we were talking ATM flies since thats the "standard". But we can get into OTM flies!
Wow, that's probably the first black-and-white thing I've seen WRT flys.Everything else is about percentages and possibilities. Makes sense, though - thanks!
Is there a situation in which an IF would be preferable to a single-side fly? I realize they're synthetically equivalent, but it seems like an ATM put fly is always more expensive than the iron due to wider ITM spreads. Also, given div risk, is there ever a reason to go with a call-side fly?
I can calculate stuff all day long, but I'm really struggling to get this thing that Taleb called "techne" (something like "craft") vs. "episteme" ("book learning".) These days, I'm seriously envious of the old floor traders who got that stuff by the boatload, and what little of it I've been exposed to has never failed to kick my trading up a notch. Shortcuts like pricing a straddle to get the expected move, or just looking N strikes/expirations up/down from the current one to roughly price a spot move/time change... that kind of thing knocks my socks off.
As you said, all fly spreads are equivalent. Choosing the iron over the natural can be due to being filled/microstructure. Also depending if you want to initiate the spread for a debit/credit.
And you're correct about the floor traders, i mean it couldn't hurt to have that experience. Desty sure did, and look at him.
I can't even tell you how encouraging that is.
"...you are way ahead of the curve..."
Dude, man, I told you this months ago! You didn't believe me!
Well, hear them now and believe me later! (I won't post the SNL video with that bit, I've spammed the forum with enough vids tonight, hehe.)
"...to look at a screen and immediately pick up whether one strike/option is out of wack relative to the others."
When this situation hits your radar how about posting a screen-shot?
Wouldn't even have to annotate it. It might make a good puzzle - spot that outlier.
Bro, I had nothing to compare it against. Hell, back then, I didn't even know if I could make a steady return - I was just ramming my head against a brick wall just to see where the chips fell; accumulating tiny bits of knowledge and just starting to build out the whole picture. Now... it's a different world. Still not where I want to be income-wise, and nowhere near what I want knowledge-wise - I don't think that river's ever going to run dry - but I've got a solid grip on what I know, and I'm working my ass off to gain more. And...
but here’s the thing, let’s say he doesn’t annotate it.
you could spot the outlier, yet it’s not the outlier he was referring to. Thus, each individual trader has his own “edge” he perceives vs others. Interesting. Unless we are looking for specifics.
currently @ 61.10
People in these forums always talk and know Desty innerstands synthetics more than the next man. As well his knowledge of microstructure.
It is a coincidence one of his go-to's is the fly? Buying at the bid, selling at the ask, and trading delta-zero helped profit off of butterfly's, box's, and reverse conversions.
Obviously his time at the CBOE/CBOT helped him appreciate the alchemy of market making. Knowing this its no wonder he utilizes these spreads.
It is a coincidence one of his go-to's is the fly? Buying at the bid, selling at the ask, and trading delta-zero helped profit off of butterfly's, box's, and reverse conversions.
Obviously his time at the CBOE/CBOT helped him appreciate the alchemy of market making. Knowing this its no wonder he utilizes these spreads.
When you say "short the upside skew" referring to this fly, does it mean it's a credit fly with the loss exposure on the long side?
This thread became one of my favorite and I am trying to understand and learn as much as possible.
Its a symmetrical fly (90pt widthwings), so your exposure is on both up/downside. Also, iron flies are initiated for a credit. And tao didn't specify but i'm assuming his iron is a 121?