Iron fly

tommcginnis said:
The difference is "skew."

Post up a bunch of near-market calls and puts. "Near-market" means above and below.
Construct a call Bfy, a put Bfy, and an iron Bfy.
Check out the pricing against the net delta of the positions.

Do this again for half-a-dozen expirations, going out maybe by as much as 90 days. (5 weeklys would show it, though...)
Check out the differences in the same positions over time. (i.e., with decreasing DTE.)

The differences you'll see are based in the same things that push ITM puts and ITM calls to be different than their (call;put) inverses.
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Thanks Tom
 
tommcginnis said:
Not to hijack a thread, but I posted this about a week ago, to a thread where you were the next poster:
spx0731pmbwbcapture-png.206515

The four data columns show a 1 strike x 2 strike BWButterfly, then 1-strike, 2-strike, and 3-strike verticals. The highlighted cells are combos ~26¢ to 41¢.

In the closest DTE week, rolling from BWB at cell H158 to the vertical at I158 would take the position from 37¢ to 41¢ -- just about covering commissions.
In the second DTE week, rolling from BWB at cell N160 to the 1-strike vertical at O164 would about do the same thing.

The vol listed here is ~15, so there is a bigger jump (i.e., a bigger sacrifice in breathing room) in going back and forth between a vertical and the BWB, but in a low-vol environment, it's not that big, and if you can wait until the long strike deltas to be > the middle/short strike deltas, an approach of your position makes you money. The position delta here (3020) is .201-[2x.160]+.092 = -0.027 → You're losing money with every point of approach. When that number is positive, guess what!! The position you sold can now be "bought" back for a negative price. (Look in the last 24 hours...)
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Like reading Chinese. :banghead:
 
I have this idiot McGinnis on ignore so I missed his gibberish... there is no difference. An iron fly is equivalent to the call and put flies. The combo flies (straddle + strangle) are arb-equivalent to the natural flies (verts).
 
destriero said:
I have this idiot McGinnis on ignore so I missed his gibberish... there is no difference. An iron fly is equivalent to the call and put flies. The combo flies (straddle + strangle) are arb-equivalent to the natural flies (verts).
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So my noob question would be: Why trade call and put flies and just trade the iron's? Whats the difference?

Maybe its better to use call flys in you're playing for a pin at some higher price than spot. Puts if lower bias.

Iron's for current spot price bet on the near future? Is this the right thinking?
 
Philo Judeaus said:
So my noob question would be: Why trade call and put flies and just trade the iron's? Whats the difference?

Maybe its better to use call flys in you're playing for a pin at some higher price than spot. Puts if lower bias.

Iron's for current spot price bet on the near future? Is this the right thinking?
More...

In fact I'm reading @destriero older threads and your intraday trading weekly flies on AAPL etc... very interesting as I've never looked at weeekly flies. I'm trying to learn how you decide to structure these and what to look for when implementing flies... even calendars.
 
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