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dual otm flies?
- Thread starter newguy05
- Start date
A fly ain't gonna help you if all you get is a "hit"... The mkt won't give you money that easily.
Well, in my experience, pinning the strike (which is what you're trying to do) isn't as easy a game as you think it is. The mkt won't normally pay you more for the fly than you paid for (esp taking bid/offer into account) when/if you get near the middle strike. It will only happen closer to expiry and/or if vol collapses. Obv, this is simplistic and there's other variables, but that the gist, IMHO.
I presume you're suggesting this (I mean the fly bit) due to the directionality of index vol, atticus? If so, out of idle curiosity, would you say it's still a meaningful relationship, given the outright level of vol?Quote from atticus:
Downside long calendar, upside fly. If you're intent on holding to expiration it won't matter, but if you're looking for a touch, then go with the down n out calendar and up n out fly instead of dual flies.
Quote from Martinghoul:
I presume you're suggesting this (I mean the fly bit) due to the directionality of index vol, atticus? If so, out of idle curiosity, would you say it's still a meaningful relationship, given the outright level of vol?
Yeah, sure. I bear witness to it every time I hold a short delta(short gamma) fly and we sell off.
Quote from Martinghoul:
Sure, I can understand that. I am more interested in its behaviour on a rally, I guess. I can imagine this correlation has some "skewness".
They work great on rallies. Any loss on the wings due to the vol-line is more than compensated by the g/v gains. The only real risk is flipping delta position.