Destriero - Butterfly Trades

[.sigma]

For example, I trade a fair bit of ratio flys (@taowave you know the name for those, right? ) in the indices, but in my case i do them with bellies OTM. They work well if I can find a structure that's flat decay, long local gamma and short vega - all while getting the widest strike spread between the wings relative to the premium. In that case, it essentially becomes a loss-limited way to short the skew while getting (or tolerating) mild directional exposure - especially when skew is steep and the wings are negatively convex. If nothing happens, because of the wing decay, your risk profile will look more and more like a vanilla option

Thanks for the response. I have a few questions.

When you say ratio flies, are you referring to the 132/231?

What expiration are you trading these? And how far away from the money are you selling the belly usually? This method is worth looking into, it looks like a legit way to sell the skew with bounded risk.

 

[tradeking007yahoo]

i like to take an even longer term approach..reanissance used the "CICADIA!"

 

[BlueWaterSailor]

Just like to point out here that you mean a "depository". A "suppository" is something all-together different, and it involves cavities of the body.

ITYM "repository". And I'm pretty sure OOO knew what he was writing.

 

[MarkBrown]

Yes ...... @destriero is a suppository of information.

omg you called it but backwards dest is the asshole and his dreamers are the butt plug.

 

[ironchef]

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.

Because most of your posts read like Greek (no pun intended) to me. I didn't understand what you said.

Why anyone continues to regularly post here is beyond me.

I gave up posting and reading posts. Instead, went back to school to learn your Greek.

 

[ironchef]

This is not exactly right. Depending on how you structure it (the belly ATM or the belly OTM), flys can express somewhat different views.

OK, so it is belly, not position.

Like @destriero, you know what you are doing but you wrote your post in English, not Greek.

 

[tsznecki]

For example, I trade a fair bit of ratio flys (@taowave you know the name for those, right? ) in the indices, but in my case i do them with bellies OTM. They work well if I can find a structure that's flat decay, long local gamma and short vega - all while getting the widest strike spread between the wings relative to the premium. In that case, it essentially becomes a loss-limited way to short the skew while getting (or tolerating) mild directional exposure - especially when skew is steep and the wings are negatively convex. If nothing happens, because of the wing decay, your risk profile will look more and more like a vanilla option

Shout out to sle here for confirming in words what it took me many years with ops to realize what I should be doing with OTM flies. Cheap leverage.

 

[cesfx]

I am loving this thread. Finally starting to understand the value of butterflies and it's like wiping glasses clean after a couple of years. Thank you traders

 

[OptionsOptionsOptions]

• I like to look at the standard +1,-2,+1 fly has buying the ITM option at a major discount - much lower than intrinsic value.
• But with a major caveat - at expiry the underlying must close around the short options strike.

 

[deltaf0rce]

Bobby what you know about flies? You’re too scared to sell guts ATM lols

Remember when we met Bobby over the summer, he had a stock and showed his risk model on TD and had like 8 puts strikes decorated on his model like a god damn Christmas tree