my divine commedia to optionality
- Thread starter .sigma
- Start date
Although I've only been trading these for a limited time, fly's in general have been a strategy I utilize.
Lets discuss how to use this and compare it to other fly positions.
We all know the iron fly is initiated for a credit which is different from your standard fly which is usually a debit.
The iron fly is the combination of a short put spread and a short call spread so it is short vega. I prefer iron-fly over iron condors. If you're going to sell premo my opinion is to sell ATM, it provides the best risk/reward. Selling far OTM has been for me at least not very fruitful since its nearly impossible to manage the gamma risk.
It all depends if you want to debit or credit your account. This is why I also use long-fly's a lot because your account is debited and you aren't using as much buying power.
Lets discuss how to use this and compare it to other fly positions.
We all know the iron fly is initiated for a credit which is different from your standard fly which is usually a debit.
The iron fly is the combination of a short put spread and a short call spread so it is short vega. I prefer iron-fly over iron condors. If you're going to sell premo my opinion is to sell ATM, it provides the best risk/reward. Selling far OTM has been for me at least not very fruitful since its nearly impossible to manage the gamma risk.
It all depends if you want to debit or credit your account. This is why I also use long-fly's a lot because your account is debited and you aren't using as much buying power.
P/L Day: ($300)
Overall this move up hurt my account. Betaweighted my deltas to $SPY and I'm negative/neutral. That move in the Russell is immense.. looks very bullish.. yet the market will probably retract tomorrow lol. But upon further examination of price action it looks as bullish as ever.. new highs with a full green bar with above-average volume.
Overall this move up hurt my account. Betaweighted my deltas to $SPY and I'm negative/neutral. That move in the Russell is immense.. looks very bullish.. yet the market will probably retract tomorrow lol. But upon further examination of price action it looks as bullish as ever.. new highs with a full green bar with above-average volume.
So I'm realizing deep ITM debit spreads is a great strategy for swing trading weekly/monthly. It gives a great R:R as well better than ATM/OTM
I always wonder why am I selling this option? Why am I not buying it? What's the reason? There's a few reasons.
1. Where is IV rank?
2. What's the IV percentile?
3. What's the implied vol?
4. What's the term structure looking like? (contango/backwardation/frontmonthvol)
5. What is the realized/historical vol?
Depending on those questions and depending on where spot is in its range I will choose a credit for high IV and debit for lower.
I really never liked iron condors as a trade. It seems like a trade for traders whoarent too good with direction.
Instead of condors I'll choose an ATM iron fly any day of the week. I always sell ATM. I used to sell farther OTM >.40 delta but the R:R is best at ATM, and it's the most liquid options, and your selling peak-gamma which means gamma can only go down and not up like OTM premium. Once gamma rises it's very hard to manage and you blow out a wing
I always wonder why am I selling this option? Why am I not buying it? What's the reason? There's a few reasons.
1. Where is IV rank?
2. What's the IV percentile?
3. What's the implied vol?
4. What's the term structure looking like? (contango/backwardation/frontmonthvol)
5. What is the realized/historical vol?
Depending on those questions and depending on where spot is in its range I will choose a credit for high IV and debit for lower.
I really never liked iron condors as a trade. It seems like a trade for traders whoarent too good with direction.
Instead of condors I'll choose an ATM iron fly any day of the week. I always sell ATM. I used to sell farther OTM >.40 delta but the R:R is best at ATM, and it's the most liquid options, and your selling peak-gamma which means gamma can only go down and not up like OTM premium. Once gamma rises it's very hard to manage and you blow out a wing
Focus on your strength.
Anyone who's following this journal can look at the tickers I've littered throughout these pages.
I have a knack of finding piece of shit stocks that have been beaten the he'll up, finding the temporary bottom and ride the short squeeze for a few bucks. I do this all the time, although not nearly as much as I should be since its hard to find beaten up bearish stocks in a flaming bull market.
I'm on average (if I'm wrong on entry) 3-6 days early from the initial short squeeze mark up. But my hit-rate is about exactly 1 standard deviation at 68%.
Anyone who's following this journal can look at the tickers I've littered throughout these pages.
I have a knack of finding piece of shit stocks that have been beaten the he'll up, finding the temporary bottom and ride the short squeeze for a few bucks. I do this all the time, although not nearly as much as I should be since its hard to find beaten up bearish stocks in a flaming bull market.
I'm on average (if I'm wrong on entry) 3-6 days early from the initial short squeeze mark up. But my hit-rate is about exactly 1 standard deviation at 68%.