Quote from RichardRimes:
only a fly AT the money is neutral. When it is structured OTM then its also directional.
Sorry, but no. A butterfly is never "directional" because it narrowly defined profit range. Placing it OTM doesn't make it a directional position - it's still a neutral position because it will not gain or lose with the market. It has a fixed max profit and loss.
A directional position will gain as the market goes in its favor, and lose if the market goes against it and you didn't hedge. Calls and Puts are really the only "directional" positions you can take.
Quote from drownpruf:
You are so far out of your depth that it's laughable. Was the OP's fly neutral? wheeeeeeee
A butterfly is neutral regardless of whether you place it correctly or not. Was the butterfly that you placed ATM that had the stock shoot far past its wings "directional" too? No, it wasn't...but don't let me hold you up from licking windows and giggling.
Quote from Doobs789:
And out at 17.00. That's how you trade flies.
If you do it right you can set them and forget them. If you need to "tweak" it you're probably choosing a stock that is moving around too much or too little to be a viable candidate for a butterfly - and instead you should be using condors.
Quote from RichardRimes:
FX I give you a lot of credit for trying something different. I did one earnings play of FSLR..call diagnal slightly OTM which didn't go my way and ended up closing for a sm loss. The point is at least with an options play you seldom lose your max bet. Depending on the structure and how you manage your trade you can end up with a sm winner even if the trade doesn't end favorable. Granted you give up your home run when you limit your downside but the way to stay in the game long term is with the singles and doubles.
In all honesty, if you use options for more than basic calls, puts and two-strike spreads you are going to lose. Your loss may be gradual due to a perceived sense of security in that you can't lose more than your initial investment...but for this illusion of "limited risk" you are giving up time. Not only does time work against you in long options positions due to decay, but if you didn't estimate direction correctly your only real play will be limiting your max loss.