Quote from sle:
There is no such thing as "placement of a position", you are making up stuff. My example was to illustrate that you can have flys that are highly directional positions.
If you're trading a range it's not directional, it's a range. It doesn't matter if you place it ITM or OTM. Stop trying to confuse clownpuf. He just signed up for another penny stock trading seminar.
But of course there is. It is a proper distributional bet where you are buying the part of distribution you see as more probable and sell the parts of the distribution that you see as overpriced. You could think of a fly as a combination of two wide european digitals - you can be long both (if you are pinning the forward) but also you can be long one and short the other, which makes it a directional trade.
I don't believe in micro-managing trades. If you chose a good underlying and an appropriate strat at the right time then you can ride it out without needing to close wings or adjust the strikes' positions.
Quote from RichardRimes:
I give up...Safilo you obviously don't trade for a living.....I'm done wasting my time.
Obviously if you're trolling this site you're not doing much trading, except for closing out flyz for a $17 profit and cheering about it.
I did have one more contribution to the fly discussion however. I listen to Tom and Tony on tastytrade
When you're not listening to tim sikes...
Quote from drownpruf:
This safilo idiot is alluding that the fly should only be traded neutral as that's his interpretation with his limited knowledge. Purely as a bet on distribution centered on the forward. Swapping realized for implied. He won't know wtf I am talking about, but that's it.
Good traders don't make bets. They make calculated risks. You keep projecting your fail onto people who are obviously smarter than you because you're mad that you keep wiping out your play money starter accounts.
A long fly (natural) can be short or nominally long gamma if OTM. The fly wasn't "devised" as it's simply a straddle-strangle combo. The error of "positioning" is a result of being wrong on vola (don't trade the fly), direction (deltas), or distribution (flip modality).
I don't know why you're having such a hard time with this - but when you limit risk you limit profit potential, and hence constrict yourself to a range. This range is not directional. It's a "target" that does not move. Delta is irrelevant because you're either right and the stock is in the range you targeted or you're not - and calling it binary is misleading because you have a range of potential profit not a specific price where you profit while losing at all others.
sle's digital analogy is excellent as the payout on the vertical is embedded in the payout of the digital. A 30/100 otm digital is a $3 ten-wide vanilla call spread. If the otm digital is at risk then you were wrong on the distribution and another position would've been more appropriate. It doesn't mean you shouldn't trade flies directionally, to the contrary. A neutral fly is the most costly and neutrality doesn't exist.
Except that flies are a strategy that exist for a neutral stock - i.e. a stock that moves within a tight range < 3 std deviations from its current point on avg. That has been ATVI for the last month or so and for a while, VALE.
An example of a stock that you would be retarded to place a fly on is AAPL...or the NDX.
Like I said before, the places you're suggesting noobs use butterflies would have been better suited to condors. Short condors work great on SPX.
Quote from drownpruf:
Right, all flies are now zero delta at all locales. lol simply doesn't cut it.
Delta is irrelevant if you're defining your profit and loss regions - as you do with a spread. Delta matters if you're leaving one or both sides open-ended (aka directional). Fixation on any one stat is the hallmark of cluelessness.
Quote from FXforex:
Butterfly compared to a Bull Spread
The day after earnings at 12pm EST the Butterfly was worth $100.00, the Bull Spread would be $115.00. Commissions not included.
- Butterfly -$210.00
- Bull Spread -$515.00
If you used a long condor you could have set the midpoints ATM on both sides and the wings out by the number of strikes you expected the stock to rise (or fall) to capture profits.
If you gave yourself 30-60 days to work with in terms of expiry, you could have profited in both ways since the stock usually reverts and goes back to above/below where it was pre-announcement.
Your condor's wings would have been short (midpoints long), so if the stock went up as you expected, you'd buy back the short put wing for next to nothing, profiting from the difference, and then you'd have a long put with no limit on profit potential and a highly offset cost to you.
