Riskarb's combo to fly conversion journal

[RichardRimes]

thats why we have momomey translate....

QUOTE]Quote from Aristotle:

I honestly have no idea what riskarb is talking about, but it sounds mighty impressive. Is it Arabic? [/QUOTE]

 

[riskarb]

Quote from bruford90125:

Riskarb,

Enjoy reading your posts. Thanks for the contributions.
Not to split hairs, though, but your initial short position is the straddle and not the combo, right?

just to clarify: Your initial position in the CEPH example is short 1 75 call and 1 75 put. You would be at risk on the straddle for a max of ten days. Then to complete the iron fly you would buy 1 80 call and 1 70 put hoping that your net position would be an iron fly for less than fair.

Am I getting you correctly?

Thanks. Any put+call combination is a combo.

Basically, yes. I am not married to the 70/80 wings; I may choose to trade the 65/85 wing strikes.

 

[Nordic]

Quote from riskarb:

Thanks. Any put+call combination is a combo.

Basically, yes. I am not married to the 70/80 wings; I may choose to trade the 65/85 wing strikes.

Thanks Risk,

That was my question also. The wings are at the traders discretion

 

[riskarb]

Quote from Nordic:

Thanks Risk,

That was my question also. The wings are at the traders discretion

Sorry Nordic, missed your earlier post.

 

[IV_Trader]

B , more of the same...

 

[momoneythansens]

Riskarb,

Planning anymore combos today/tomorrow? Or all set for Feb and waiting for conversions?

MoMoney.

 

[ssternlight]

pulled up the CME straddle at random. It's up over 10% since the call.

 

[thenewguy]

Hey risk,

Still very new to this, so I hope you don't mind the rudimentary question, but what's the best profit scenario from these positions? Are you hoping the underlying of the initial straddle flatlines til expiration or are you trying to put the wings on? If IV is decreasing and you're capturing theta would you ever just leave it alone?

Thanks,

- The New Guy

 

[riskarb]

I'm going to run new tickers today near the close, and update the current positions. I haven't look at that quote page this morning, but I will try to keep the near-neutral combos through the weekend. I am sure some will be flied, such as the CME.

 

[riskarb]

Quote from thenewguy:

Hey risk,

Still very new to this, so I hope you don't mind the rudimentary question, but what's the best profit scenario from these positions? Are you hoping the underlying of the initial straddle flatlines til expiration or are you trying to put the wings on? If IV is decreasing and you're capturing theta would you ever just leave it alone?

Thanks,

- The New Guy

In reality, I am prone to hold those positions that show a decreasing gamma/theta and/or trading near neutrality. I am inclined to fly those positions that show a large mark-down on vol, as the wings will become cheap. Often a drop in vol will produce a riskless fly with an expectancy that makes simply covering the short combo less desirable.