Destriero - Butterfly Trades

.sigma said:
I'd like to add that although a symmetrical natural fly (+1/-2/+1) has risk on both the upside and downside, there's a distinction one should be aware of.

Example: 105/110/115 call fly. If spot closes below 105, the entire call fly will expire worthless, obliterating your debit. But if spot closes above 115, you potentially have assignment risk, which is why its prudent to manage butterflies. So while yes theres risk on both sides, theres a different type of risk on the upside compared to the downside.

Hope this helps.
More...

But if you left it unmanaged and closes above 115, you end up flat anyway right? (just losing the debit if it was initiated as a sym. natural per your example).
The real assignment risk is if spot closes between 115 and 105.

Please correct me if am wrong, sometimes I get such a hard time closing them that i'm exploring the what-ifs in letting some of them expire.
 
Report card time.

First 30 flies, 63% winners and 37% losers. Overall profitable but not killing it.

It was a simple setup, 121 call flies 1 SD wide, 30 days to expiry. Used Chef's opinions to forecast direction for belly/body placement. Took profit when target was met. As for trade management, after early fiasco tried to make adjustments, for later trades, simply let them expired.

This setup ignored all the stuff @destriero talked about, microstructures, skew, etc. and was a pure directional play. It is good enough to place small trades for fun and for pocket money but not ready for prime time.

Great thing about fly: The downside is limited.

The study continues.
 
ironchef said:
Report card time.

First 30 flies, 63% winners and 37% losers. Overall profitable but not killing it.

It was a simple setup, 121 call flies 1 SD wide, 30 days to expiry. Used Chef's opinions to forecast direction for belly/body placement. Took profit when target was met. As for trade management, after early fiasco tried to make adjustments, for later trades, simply let them expired.

This setup ignored all the stuff @destriero talked about, microstructures, skew, etc. and was a pure directional play. It is good enough to place small trades for fun and for pocket money but not ready for prime time.

Great thing about fly: The downside is limited.

The study continues.
More...

did you initiate the fly ATM? Or slightly or farther OTM? also, which products have you been testing these on?
 
ironchef said:
Report card time.

First 30 flies, 63% winners and 37% losers. Overall profitable but not killing it.

It was a simple setup, 121 call flies 1 SD wide, 30 days to expiry. Used Chef's opinions to forecast direction for belly/body placement. Took profit when target was met. As for trade management, after early fiasco tried to make adjustments, for later trades, simply let them expired.

This setup ignored all the stuff @destriero talked about, microstructures, skew, etc. and was a pure directional play. It is good enough to place small trades for fun and for pocket money but not ready for prime time.

Great thing about fly: The downside is limited.

The study continues.
More...

what do you define as target met
 
.sigma said:
did you initiate the fly ATM? Or slightly or farther OTM? also, which products have you been testing these on?
More...
Never ATM. Mostly OTM but sometimes ITM.

SPY and single names, a few I already mentioned in prior posts.
 
Justrade said:
what do you define as target met
More...
I had a profit target prior to entering the trade. Once met, closed the trade, no exception. If the trade went against me, I let it expired whatever the outcome.

It is just an experiment, not a secret source.
 
You must log in or register to reply here.
Back
Top