Protecting a DITM call spread

JackRab said:
Uhm... who's trading a box? 00/60 CS long and 30/60 PS long = just a short 00/30 PS...

And of course your butterfly has more potential when we stay put at 2260, since your collecting more theta... but you've increased the risk since you don't want any moves at all.

@xandman, do you want less risk or more risk/similar position? Or a completely new position with flat delta to start?
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I thought the PS to make a box would be optimal given the skew . Nonetheless, that last few days of theta is enticing for a fly.

Please illuminate me on how the straddle is used for the assessment. Thanks.
 
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xandman said:
I thought the PS to make a box would be optimal with the given skew which was assbackwards since I am buying the expensive side. Nonetheless, that last few days of theta is enticing for a fly.

Please illuminate me on how the straddle is used for the assessment. Thanks.
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You're not making a box, a box is basically a flat position... in this case a box would be to buy the 60/00 PS...

So than you would be +2200C - 2200P -2260C + 2260P... a 2200 reversal and a 2260 conversion...
That's a box and has no risk... (unless you consider pin...)

If you trade the 60/30 PS, you end up with:
+2200C -2230P -2260C + 2260P... and basically through the conversion in the 60 strike your 2200C becomes a 2200P and you have a synthetic short putspread, +2200P - 2230P

So, you lower the risk and still have a little bit of premium to collect.

That straddle is now about 20 bucks (7 DTE), which is 0.9% of the underlying... which with a week to go isn't that much... especially since the Jan27th straddle (3 DTE) is about 16 bucks (0.7%)...

In hindsight, it might not move and the straddle will lose all value and still was expensive... but at this time I don't consider it high. And then I wouldn't want to be short ATM straddle... (which you basically will be when long a butterfly).
 
xandman said:
I thought the PS to make a box would be optimal given the skew .
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... by the way, I assume with 'given the skew' you mean you would like to sell skew? Be short OTM puts?

That 60/30 long puts spread would in fact be a short skew trade... since you're buying ATM and selling OTM puts...
 
And... looking at your 20/60/85 call-fly...
Compare it with the Jan27th...
2220C 42.20
2260C 8.50
2285C 0.80
With 3 days to go instead of 7, $26 is cheaper than your $23 IMO...
 
JackRab said:
You're not making a box, a box is basically a flat position... in this case a box would be to buy the 60/00 PS...

So than you would be +2200C - 2200P -2260C + 2260P... a 2200 reversal and a 2260 conversion...
That's a box and has no risk... (unless you consider pin...)

If you trade the 60/30 PS, you end up with:
+2200C -2230P -2260C + 2260P... and basically through the conversion in the 60 strike your 2200C becomes a 2200P and you have a synthetic short putspread, +2200P - 2230P

So, you lower the risk and still have a little bit of premium to collect.

That straddle is now about 20 bucks (7 DTE), which is 0.9% of the underlying... which with a week to go isn't that much... especially since the Jan27th straddle (3 DTE) is about 16 bucks (0.7%)...

In hindsight, it might not move and the straddle will lose all value and still was expensive... but at this time I don't consider it high. And then I wouldn't want to be short ATM straddle... (which you basically will be when long a butterfly).
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Dude, just stop. You are out of your depth.

Adding the 2200/2260 put spread would result in the 2200/2260 long box. The 2200 strike is the long synthetic -- the 2260 strike is the short synthetic.

It is NOT a conversion and reversal. Please stop mangling terms. Those involve underlying. It's simply a long and short synthetic.

The risk-position converges to a box as you widen the put strikes. I realize that you stated 20/60 and 30/60 for the put spread. My point is that you are legging into a box as you widen strikes... and those OTM puts aren't worth the sale.

Telling us that the straddle prem is 1% is brilliant, Bro.
 
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JackRab said:
I don't think a long butterfly has that much potential compared to the risk... I mean, the straddle is less than 1%... That's not that expensive...
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Let's bet on it. /ES is at 2265 and the fly is marked to $30. He can buy it for a marked 16 here. Assume 15-16 in edge as of the opening post on this thread.
 
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destriero said:
Dude, just stop. You are out of your depth.

Adding the 2200/2260 put spread would result in the 2200/2260 long box. The 2200 strike is the long synthetic -- the 2260 strike is the short synthetic.

It is NOT a conversion and reversal. Please stop mangling terms. Those involve underlying. It's simply a long and short synthetic.

The risk-position converges to a box as you widen the put strikes. I realize that you stated 20/60 and 30/60 for the put spread. My point is that you are legging into a box as you widen strikes... and those OTM puts aren't worth the sale.

Telling us that the straddle prem is 1% is brilliant, Bro.
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No this again...

I've been an options market maker for 10 years. Headed desks in equities/index/fixed income...
I'm definitely not out of my depth.

I said traded the 30/60 putspread... not the 00/60, do yourself a favor and get some glasses.
A long synthetic is a reversal and a short synthetic is a conversion, indeed if you trade the underlying, but if the underlying falls away if you have them both on now isn't it?

The last week of trading IV doesn't mean shit anymore... just look at dollar values... and therefore I said look at the straddle value, which is less than 1%... meaning that you only need 1% move for that straddle to be worth while buying.... which IMO isn't that much with 7 days to go. A point being made right now, since the future just hit 2280 a few hours ago....

I'm not legging into any fucking box... and IMO selling atm at these levels aren't really worth it either...

You really need to get a grip and stop being a dick.... Just because you know some exotics, doesn't make you the only one who knows options. If you do want to start a pissing contest... I'm 100% sure I've traded way more than you did in volume/position size.... so back the fuck off... go suckerpunch some poor schmuck in a Walmart parking lot
 
destriero said:
Let's bet on it. /ES is at 2265 and the fly is marked to $30. He can buy it for a marked 16 here. Assume 15-16 in edge as of the opening post on this thread.
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This doesn't make any sense either.

2200/2260/2320 at that time was doing just over 40... I don't care what you've traded when... the price is 40.... You can't buy it for 16, or for 30 or 32...... it's 40

You do a trade, than later you re-evaluate your position.... and decide what you want at that time.

If I bought Apple at 30, and if I can now buy more at 120 does that make it a good trade because I've averaged it at 75? No, the initial trade was great... but now you evaluate and decide on what to do now at this price... not 75.
 
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