Quote from Eliot Hosewater:
Yeah, you're right, I don't know what I was thinking (except whether or not to sell my DIA puts before OE).
Anyway, would you touch the $10 strangle, or is the volatility too high? Is there any way to protect it with some flying beast (butterfly, condor, etc)? I haven't studied those at all yet. Or will you always either have some risk or no profit no matter what combinations you put on?
Interesting you mention BWBs. I've been looking at them a lot lately. What is your commentary/opinion of them?Quote from daddy'sboy:
I generally confine my commentary to strategies I feel I have done enough of to get a feel for them - straight calls/puts, debit/credit verticals, calendars/diag time spreads, flies/bwb (on indices), iron condors (on indices), collars/married puts ...
I'm a fairly simple sort of chap so I try and keep things plain. I see bwb's as low risk otm bets that need careful strike selection (the most tricky part of the whole selection process), I only do them on indices (preferably for a credit/even or very small debit), with no more than 5 to 6 weeks to expiry. The far otm option only acts as a margin reducer and turns what would otherwise be a ratio spread into a bwb.Quote from mysticman:
Interesting you mention BWBs. I've been looking at them a lot lately. What is your commentary/opinion of them?
Quote from RichardRimes:
sorry I'm dense Daddy's boy but what is a BWB?
Quote from mysticman:
"OTM Bets" is a good way to describe BWBs. You have to be either way OTM or way before expiration to get a small credit, and then what is the point? You wait and wait and wait and hope that the wheel of fortune lands on your strike, and the odds of that are very very small. If you do them for the credit that also makes no sense since there are other strategies that are better for that. The risk graph is horrible at any time before expiration. The underlying can make a move right to your short strike a week after you open and you will lose money. Of course, some "gurus" at Optionetics say not to believe the risk graph.
For me, I am much more sold on what I call the SWB (shortened wing butterfly). Instead of going out from the fly, you bring one wing in toward the body. SWBs are done for a small debit, but they can be done even close to expiration, close to the money, and the risk graph has a positive slope in any time frame.
Yes, you can use them like a straddle, braketing the market, with less debit.Quote from Eliot Hosewater:
Can you give us an example? Do you think this can be applied to the OEX play I mentioned above?