Has anyone tried Locke's "Bearish Butterfly" strategy with any degree of success? I believe I can piece his technique together based on watching short videos he's posted on his adjustments without plunking down $500 to watch his videos. How about Dan Sheridan's calendar spread adjustment techniques? Anyone used them? It seems like a solid enough strategy, and unlike Locke, he puts more information out there for free.
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Has anyone used the "Bearish Butterfly" strategy with any degree of success?
- Thread starter darkshogun
- Start date
Quote from darkshogun:
Has anyone tried Locke's "Bearish Butterfly" strategy with any degree of success? I believe I can piece his technique together based on watching short videos he's posted on his adjustments without plunking down $500 to watch his videos. How about Dan Sheridan's calendar spread adjustment techniques? Anyone used them? It seems like a solid enough strategy, and unlike Locke, he puts more information out there for free.
Wouldn't a bearish butterfly just be a normal butterfly with the central short strike price and the profitability zone below the current market price? Is there much more to it than that?
Wouldn't any adjustments basically just aim to keep it delta neutral?
Quote from comintel:
Wouldn't a bearish butterfly just be a normal butterfly with the central short strike price and the profitability zone below the current market price? Is there much more to it than that?
Wouldn't any adjustments basically just aim to keep it delta neutral?
Mostly, but the technique is somewhat more complicated. He (Locke) uses RUT with 50 pt wide spreads. I believe he puts on a new butterfly when the price of the underlying moves upward 20 points, and yet another when it moves another 20. I think he then 'rolls' the lowest butterfly up to the top if the price continues upward beyond that. It seems that vertical spreads are also used to increase or decrease the delta when necessary.
bunch of idiots gathered together ,I have bmw 4,8 complicated beast ,f... that I want raw power without that complicated shit,this bimmer every second week in shop,ttooo complicated
Quote from newgptrader:
bunch of idiots gathered together ,I have bmw 4,8 complicated beast ,f... that I want raw power without that complicated shit,this bimmer every second week in shop,ttooo complicated
You're the only one who sounds like an idiot at this point. Do you have anything helpful to offer on the subject other than a rant?
Quote from darkshogun:
Mostly, but the technique is somewhat more complicated. He (Locke) uses RUT with 50 pt wide spreads. I believe he puts on a new butterfly when the price of the underlying moves upward 20 points, and yet another when it moves another 20. I think he then 'rolls' the lowest butterfly up to the top if the price continues upward beyond that. It seems that vertical spreads are also used to increase or decrease the delta when necessary.
Basically it sounds to me as if he is basically "averaging" up to 3 times as the market rises, widening out his profit zone in an attempt to to get "short the market" from an advantageous position before it finally declines, he hopes.
I guess that's ok if planned in advance but it could suffer a run of losses in a strong bull market that did not have pullbacks. I am not sure there is any reason to think that that approach should have an edge in general, unless one assumes that a pullback is coming within 3 tries at picking the top....
He's essentially martingaling. It has nothing to do with vol. He's rolling. ATM flies are cheap premium so it's a lesser of two evils (rolling atm (flat gamma) vs. neutral (short gamma)). I would avoid anyone telling you to adjust or roll. If there isn't an edge on vol then it's the by-product to an "always in" strategy that will eventually blow-up. Each time you add gearing to the position.
Don't sacrifice RR for hit-rate. If you're going down that road then you should limit your max-risk to something less than 5% of your account.
Don't sacrifice RR for hit-rate. If you're going down that road then you should limit your max-risk to something less than 5% of your account.
Quote from atticus:
He's essentially martingaling. It has nothing to do with vol. He's rolling. ATM flies are cheap premium so it's a lesser of two evils (rolling atm (flat gamma) vs. neutral (short gamma)). I would avoid anyone telling you to adjust or roll. If there isn't an edge on vol then it's the by-product to an "always in" strategy that will eventually blow-up. Each time you add gearing to the position.
Don't sacrifice RR for hit-rate. If you're going down that road then you should limit your max-risk to something less than 5% of your account.
You have a reputation for being very knowledgeable. What strategy/strategies does a trader of your caliber prefer to regularly trade?
Quote from atticus:
He's essentially martingaling. It has nothing to do with vol. He's rolling. ATM flies are cheap premium so it's a lesser of two evils (rolling atm (flat gamma) vs. neutral (short gamma)). I would avoid anyone telling you to adjust or roll. If there isn't an edge on vol then it's the by-product to an "always in" strategy that will eventually blow-up. Each time you add gearing to the position.
Don't sacrifice RR for hit-rate. If you're going down that road then you should limit your max-risk to something less than 5% of your account.
I take that to mean don't sacrifice risk/reward ratio for a greater probability of winning the trade? Also why do you not like adjustments or rolls? A butterfly would seem to be an absurd position to consider buying if it's not to be adjusted during the life of the trade.
That presumes there is a 'bearish' move in the market to make such a strategy work.
Not really sure that's going to happen anytime soon....everything is on full-tilt-bull (FTB)[1] mode right now.
[1] "Full-Tilt-Bull" is a term I use on many levels to describe the present markets/casinos/policies/actions.
Not really sure that's going to happen anytime soon....everything is on full-tilt-bull (FTB)[1] mode right now.
[1] "Full-Tilt-Bull" is a term I use on many levels to describe the present markets/casinos/policies/actions.