How to get a direction-biased delta?

Quote from Div_Arb:

Try an out of the money butterfly. That should fit your risk/reward profile.

If the underlying moves AWAY from your short strikes, you have limited losses (sometimes no losses). If the underlying moves TOWARDS your short strike, you will be dreaming of that new Bentley and how you are the smartest inividual in the universe.

Put an OTM butterfly in your analysis proggie and smoke it.
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Huh?

Butterflies are limited risk and limited reward positions. Further, assume that a position is exposed directionally. Unless you compute the IV for the position and what you paid/sold for it in vol terms, the move may come and you may still make/lose (depending on whether you are long or short vol) money if IV implodes in the meantime.

nitro
 
If you do an OTM butterfly, the delta gains outweight any changes in vol for the most part and it becomes a directional play not a vol play in general. So if stock is at100 and you do a 110/120/130 OTM call fly with high vols, the move higher should outweight the crush in vol unless you paid 300% vols and it crushes to 50% or some extreme like that.

But still dont think it gets at what the OP was asking.

Quote from nitro:

Huh?

Butterflies are limited risk and limited reward positions. Further, assume that a position is exposed directionally. Unless you compute the IV for the position and what you paid/sold for it in vol terms, the move may come and you may still make/lose (depending on whether you are long or short vol) money if IV implodes in the meantime.

nitro
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Quote from nitro:

Huh?

Butterflies are limited risk and limited reward positions. Further, assume that a position was exposed directionally. Unless you compute the IV for the position and what you paid for it in vol terms, the move may come and you may still lose money if IV implodes in the meantime.

nitro
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Dude, "huh?" is right. I dare to say that you don't have a very good comprehension of butterfly spreads.

Model out a July 90,91,92 call butterfly spread on IWM and you'll see what I mean. Your max loss is $50 while your max return is around $900. you will be sipping on Don if the vols implode, as you put it, since the short strikes drive your returns. Vega for the most part is meaningless with a butterfly, however, so I'm not sure where you got this idea from.
 
Quote from Div_Arb:

Dude, "huh?" is right. I dare to say that you don't have a very good comprehension of butterfly spreads.

Model out a July 90,91,92 call butterfly spread on IWM and you'll see what I mean. Your max loss is $50 while your max return is around $900. you will be sipping on Don if the vols implode, as you put it, since the short strikes drive your returns. Vega for the most part is meaningless with a butterfly, however, so I'm not sure where you got this idea from.
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So what you are saying is that your risk and reward are both capped, but your reward is many times that of the risk. Fine, but I think the idea is that there is no cap on the reward side.

nitro
 
agreed, vega is pretty much neutralized. as time passes delta will also increase.


Quote from optioncoach:

If you do an OTM butterfly, the delta gains outweight any changes in vol for the most part and it becomes a directional play not a vol play in general. So if stock is at100 and you do a 110/120/130 OTM call fly with high vols, the move higher should outweight the crush in vol unless you paid 300% vols and it crushes to 50% or some extreme like that.

But still dont think it gets at what the OP was asking.
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OP just can't handle the simplicity of a short-term ATM (slightly OTM).

The one position that will do better is to double it: double-the-delta on one side, still ~ 0 on the other, exactly, no: EX-ACT-LY, what OP is asking for.

Any spreading will weaken it.

I rest.
 
Hi.
I admit i didnt really read the whole tread here but I have my commetns to add:

if its delta 0 we are talking about so its impossible to keep the delta on 0 and have higher gamma to one side then the other.
in other words if you are even so you are even.

if you want to do short straggle or straddle and keep one side on more prophet then the other, then its sure possible in many ways (like writteing more shorts on one side, or buy long on otm stirkes on the side you want to enlarge your prophet)
but then again your total delta will not be zero but little plus or minus to the one side your prefer.

in other words, there is no free meals.

or I didnt really udnerstood whats you re askin for and if so forgive me.

best
 
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