Iron Butterflys - Pros and Cons

E

EliteTraderNYC

Does anyone trade iron butterflys? I am trying to analyze the pros and cons of these versus iron condors.

One disadvantage I can think of is you'd have to cover the short side that is in the money to avoid option exercise and pin risk, also it has a lower win rate. The advantages, more % gains.
 
I don't trade iron butterflies. It is the same as the regular butterfly. You probably don't want to be crossing the bid/ask trade 4 times if you can do the same trade with 3 bid/ask spreads.

The difference between the 2 strategies is that you are trading different areas of the skew/smile.
 
Otm options are typically more liquid.... Buying the strangle comes at a large cost so I might think to go extremely otm just to reduce margin req otherwise you might just short the straddle only
 
You mean at the money not out of the money?

cdcaveman said:
Otm options are typically more liquid.... Buying the strangle comes at a large cost so I might think to go extremely otm just to reduce margin req otherwise you might just short the straddle only
More...
 
EliteTraderNYC :
I traded some 9-day SPX asymmetrical IB's for a while but no longer trade them.
With the Shorts ATM, and the longs many strikes away from the shorts, you get some similarity with ICs, while reaping maximum selling premium. I think you are referring to a Straddle with long (wide) strangle for your IB (correct me if I am wrong). Initial position very close to Delta-Neutral?
Do you plan to manage the trades (make adjustments)?
 
You must log in or register to reply here.
Back
Top