Destriero - Butterfly Trades
- Thread starter ironchef
- Start date
@OptionsOptionsOptions gets it.
also in my above post I said the straddle is another interesting “spread”, wrong term, I meant structure.
ICs are slow-moving, which avoids panicking people new to trading. They also appear to offer a steady, "safe" return - but (as you note) this comes with a cost: the returns on 16D/side ICs are pretty much never going to surpass simply buying and holding an index.
Gotta admit, though: it's a pretty cute illusion!
Yep. Different folks/different strokes, and I've heard everything from 10% to 33%, but I'm definitely in your camp or somewhere nearby.
Any particular reason for $10 as the wing width? I don't have any particular rule of thumb for picking one, other than some loose chaff about max risk and maybe looking for a bit of favorable skew, and have done everything from $1 in SPY when I was just playing around to see how flys work to $50 in $SPXW.X 0-day IFs.
This is helpful - thanks! I was slowly but surely zooming in on that range of expirations myself for several reasons. Since you obviously don't want price to move when you are long a fly (and man, that's a weird bit of nomenclature...), the longer you have it on, the more risk of a random/binary event there is. I've done a number of 0-day flys in SPXW.X, and you generally get out of those within an hour and at ~10%.
I trade with portfolio margin so my first step is to see where my margin requirement explodes,and assume vol goes against me....I hope for sticky delta,but it seems like I never get what I ask for 
I only trade that stuff when skew goes bonkers,and IV percentile is 95 plus..lately,I have been moving closer to the money and going 1 x 2...Right or wrong,I believe TSLA upside will be muted,as in its not going to double in in 20 days or less. famous last word
this year was unusually good as Robin Hooders and Soft Bank/Structured products pumped up the skew to levels I had never seen in Large cap Fang stocks...50% plus was not too tough..With that said MSFT and AAPL vol has come in dramatically to I am back to split flying..
It seems like I play a bit more OTM than you in ratios....In fact,in most of my positions I am rooting for the upside outlier..MSFT and APPL....Again,the one illusion is having the 1x3's go to 5 bucks...The margin requirement explodes before that,so you need to buy the pennies to control Margin and be able to swing for the fences
I only trade that stuff when skew goes bonkers,and IV percentile is 95 plus..lately,I have been moving closer to the money and going 1 x 2...Right or wrong,I believe TSLA upside will be muted,as in its not going to double in in 20 days or less. famous last word
this year was unusually good as Robin Hooders and Soft Bank/Structured products pumped up the skew to levels I had never seen in Large cap Fang stocks...50% plus was not too tough..With that said MSFT and AAPL vol has come in dramatically to I am back to split flying..
It seems like I play a bit more OTM than you in ratios....In fact,in most of my positions I am rooting for the upside outlier..MSFT and APPL....Again,the one illusion is having the 1x3's go to 5 bucks...The margin requirement explodes before that,so you need to buy the pennies to control Margin and be able to swing for the fences
You should be able to look at a screen with no greeks and instantly be able to find a strike/option that is slightly mispriced relative to others. Often,it may take a wide bid ask and you offer/trade above mid,leaning against another offer...Not to be evasive,but its maret making 101...Its not complicated,in fact its pretty simple but it takes screen time and developing a decent feel.More art than science
Let me add a few more comments:
1. I am not a fan of @destriero, that was why he blocked me. But I have to give the devil his due. He is the real deal.
2. Knowing his trades were real and they were profitable gave me confidence to finding my own.
3. Butterfly, like selling options, in itself is not an edge. The expected profit of any butterfly is zero. I ran fly analysis using BSM and found the expected profit for any setup to be around zero.
4. But like card counting in blackjack, there are some situations where the expected profits are positive.
5. I finally understand the relationships between fly body, location, expiration, volatility, underlying behavior and exit. I will know if it works after I accumulate a statistically significant sample size (~50-100) in real trades but so far I am happy.
Happy holiday and stay safe.
1. I am not a fan of @destriero, that was why he blocked me. But I have to give the devil his due. He is the real deal.
2. Knowing his trades were real and they were profitable gave me confidence to finding my own.
3. Butterfly, like selling options, in itself is not an edge. The expected profit of any butterfly is zero. I ran fly analysis using BSM and found the expected profit for any setup to be around zero.
4. But like card counting in blackjack, there are some situations where the expected profits are positive.
5. I finally understand the relationships between fly body, location, expiration, volatility, underlying behavior and exit. I will know if it works after I accumulate a statistically significant sample size (~50-100) in real trades but so far I am happy.
Happy holiday and stay safe.
I will second this crucial point. I used to get leverage via OTM flys on long dated options but am now finding that weeklies are much better for flies. Still OTM.
I blocked you bc you're a simp. Endless questions answered and endless questions that followed. I cut ppl off at a certain level of dissonance.
https://www.elitetrader.com/et/thre...nce-at-a-discount.346405/page-22#post-5142880
You're welcome!
I've never posted a trade that wasn't marketable. It's simply too easy to prove otherwise. I've never closed a thread due to losses. I close them as they have run their course or were trolled into the dirt.
This was a double on account: https://www.elitetrader.com/et/threads/the-spx-has-hit-a-cyclical-top.325108/
This was also a double on account: https://www.elitetrader.com/et/threads/election-theme.340755/
Shoe me where the fills were not attainable. I'll wait. I'm the only dude here that has posted screenshots of gains with an account number and time stamp shown. If you can fake that then you're a fucking magician.
Why anyone continues to regularly post here is beyond me.
I dunno if that's true. I can generally tell how something is structured in a ticker with nothing other than a vega and theta figure.
You'll never earn a double in short gamma shorting wings. It's impossible. Can you hit doubles, triples, etc. in long natural flies and other verts? Sure, but they need to be OTM at inception. Neutral to long gamma trading short gamma as spot trades ITM.
$n theta in a weekly IC vs $n theta in a monthly IC is swapping gamma for vega. I'd generally rather be short the monthly in case index prints an inside day and your run shows that you earned 5-10x your theta figure. Hard-pressed to see those opportunity gains in a weekly structure. Not to say it's impossible, but rare. The gains in weeklies or dailies (trading LTD) are likely replicable in spot.
As I get older I have moved into 4-8 week expirations in much larger size. Infinitely better liquidity.
Dude, you're such an ignorant old fart - the right way is to YOLO everything on a single name/strike! It's like you don't know what options are for or something...