Chef, there should be a way. You know the problem of the weatherman who keeps predicting how the weather will be to only be right 20% of the time. Well he just has to predict how the weather won't be and he'll be right 80% of the time.
Destriero - Butterfly Trades
- Thread starter ironchef
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Chef, there should be a way. You know the problem of the weatherman who keeps predicting how the weather will be to only be right 20% of the time. Well he just has to predict how the weather won't be and he'll be right 80% of the time.
so selling butterflies instead of buying them
The problem is, this kind of weatherman doesn't get paid unless he predicts the right direction and strength of wind. And precipitation, along with the correct type and amount - or absence of it. And the exact time when they're going to happen. And the temperature - no, sorry, make that the temperature profile - while all that is going on.
There's no "opposite" to things that aren't binary. Would be nice, but - nope.
You forgot one minor factor sir: My low probability trades produced positive expectancy, meaning they have been profitable since 2013. If I reverse, I have high win rate but would lose my shirt.
I prefer low win rate any time compare to high win rate but losing.
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You are the real deal.
No, my low win rate are from trading single legs. I am hoping butterflies will produce both a profit and a high win rate.
The biggest challenge of low win rate system is it often gets very depressing staring at all the losses and at times I found it hard to keep going.
I fell you. I'm in the same boat working a weekly fly strategy. I'm trying to develop the patience to ride them out to expiration and have better exit strategies.No, my low win rate are from trading single legs. I am hoping butterflies will produce both a profit and a high win rate.
The biggest challenge of low win rate system is it often gets very depressing staring at all the losses and at times I found it hard to keep going.
I don't know how you approach trading flies, if you traded weekly time to expiry, perhaps try longer expiration?
For me I I modeled butterflies using BSM, varied every parameters to see how they affected the outcome, then tested with historical data (for example SPY). It was a huge undertaking as I spent 3-4 years on it. I am in the process of testing one approach based on reading posts from @destriero. I don't have a statistically significant sample size to know for sure. But so far, my hat off to @destriero.
Very interesting. That's quite a project. Right now I'm working a strategy based on pinning and OI using flies to short the guts at the high OI. These are usually 2 to 4 day plays with a directional bias. I like longer DTE ones around earnings broken wing put side to collect a credit and have been using longer ones in VXX as a hedge. Am starting to explore some longer DTE set ups and will look to put one on this week.
Chef,the testing is a good start and could work if you are going to trade systematically...But then you have to stick with the system..
I joked about Des secret sauce,and he came out and told you what it is,which doesnt help all that much as its more art than science...
How you traded the GILD fly is exactly what you should not be doing.
What price did you buy the fly and cover the short vertical?
I joked about Des secret sauce,and he came out and told you what it is,which doesnt help all that much as its more art than science...
How you traded the GILD fly is exactly what you should not be doing.
What price did you buy the fly and cover the short vertical?
Like you folks kept telling me, be patient don't jump the gun.
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