Destriero - Butterfly Trades

[.sigma]

After reading some posts, let’s make it clear.

essentially there’s 3 overall types of butterfly spreads.

classical symmetry = 121 call/put, 121 iron
Symmetrical Wings:
121
132
231
253
352

Asymmetrical Wings (Skip-Strike):

12 1 call
1 21 put
1 32 call
23 1 put
2 53 call
35 2 put

as well as the synthetic iron equiv to the above mentioned.

Thus you can do a 132 call with a classical foundation (symmetric wings) or break a wing (skip strike) to your preferred liking. When breaking the wing we are of course creating a delta bias and volare, taking that into account. But it really comes down to the symmetry and which wing fits your current bias (price @ time).

I’m formulating price vectors and positioning my flies according to price/time predictions. I’ve been tinkering more with ambient volare more and more lately. Range is probably my favorite QnD “indicator”.

 

[.sigma]

@.sigma let's get back on topic:

Is there a "can't lose" butterfly setUp: The wings are always above zero, in theory?

@BeautifulStranger had this set up with positive left wing but negative right:

View attachment 249576

theory? Why yes, in theory if pigs had wings they could probably fly.

I’m not too sure of a fly with both profit range wings above the break even line, but wings positioned directly on the break even line is a short + long box spread. The classical risk-profile of a butterfly, the wings do sit on the break even line, but it’s when reality hits and you realize to enter a fly you gotta pay up, that debit needs to be subtracted now, thus creating risk, thus creating caterpillars in cacoons ready to metamorphosize and spread into a butterfly.

 

[caroy]

theory? Why yes, in theory if pigs had wings they could probably fly.

I’m not too sure of a fly with both profit range wings above the break even line, but wings positioned directly on the break even line is a short + long box spread. The classical risk-profile of a butterfly, the wings do sit on the break even line, but it’s when reality hits and you realize to enter a fly you gotta pay up, that debit needs to be subtracted now, thus creating risk, thus creating caterpillars in cacoons ready to metamorphosize and spread into a butterfly.

I'm thinking the only way you get a profit range above both wings is if you leg into a fly. If you go with a 2-3-1 call set up and the market rallies towards your fly you could then sell a vertical spread leaving you with a 2-4-2 structure. If the credit collected on the spread is more than the debit paid at set up for the fly you know have a risk free fly. I don't think it can happen at inception as there is no free lunch.

 

[taowave]

In the real world you can only get a profit line above one of the wings...at a cost...

 

[taowave]

I take back everything I said about MSFT..Please forgive me

FWIW,I am about to lose yet again in MSFT....Every %÷÷×ing week I come within a "pubic hair"of having my Flys hit,and every week I go home a weepy loser...

 

[ironchef]

After reading some posts, let’s make it clear.

essentially there’s 3 overall types of butterfly spreads.

classical symmetry = 121 call/put, 121 iron
Symmetrical Wings:
121
132
231
253
352

Asymmetrical Wings (Skip-Strike):

12 1 call
1 21 put
1 32 call
23 1 put
2 53 call
35 2 put

as well as the synthetic iron equiv to the above mentioned.

Thus you can do a 132 call with a classical foundation (symmetric wings) or break a wing (skip strike) to your preferred liking. When breaking the wing we are of course creating a delta bias and volare, taking that into account. But it really comes down to the symmetry and which wing fits your current bias (price @ time).

I’m formulating price vectors and positioning my flies according to price/time predictions. I’ve been tinkering more with ambient volare more and more lately. Range is probably my favorite QnD “indicator”.

Too complicated. Us retail should keep things simple.

 

[taowave]

LOL.....I have no idea why a directional fellow like you is getting involved in this madness

Too complicated. Us retail should keep things simple.

 

[ironchef]

I take back everything I said about MSFT..Please forgive me

You are forgiven.

Like you folks kept telling me, be patient don't jump the gun.

 

[ironchef]

LOL.....I have no idea why a directional fellow like you is getting involved in this madness

Me too.

In all seriousness, my directionals have low win probabilities (~ 40%), even though overall they have positive expectancy. I got tired of staring at negative numbers everyday.

 

[ironchef]

I'm thinking the only way you get a profit range above both wings is if you leg into a fly. If you go with a 2-3-1 call set up and the market rallies towards your fly you could then sell a vertical spread leaving you with a 2-4-2 structure. If the credit collected on the spread is more than the debit paid at set up for the fly you know have a risk free fly. I don't think it can happen at inception as there is no free lunch.

But then the other half of the time you will be worse off than just buy the whole thing. In the end there is no free lunch.

I don't think professional market makers like @taowave would willingly hand over their money to us without a struggle.