How about using a simple formula of :
"expensiveness" = [price of ATM straddle]/[stock price]
and express it as a percentage.
You'll be surprised how effective this can be. I use it a lot when trading various strategies.
.sigma's butterfly book
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How about using a simple formula of :
"expensiveness" = [price of ATM straddle]/[stock price]
and express it as a percentage.
You'll be surprised how effective this can be. I use it a lot when trading various strategies.
An entire thread begging people to explain topics that have been explained more than they should have.
You should re-read the thread old man, wheres this begging you speak of?
New, just because topics have been discussed before, doesn't mean we can't keep on discussing them and creating new ideas and help each other.
I actually enjoy your posts, new.. but this one was a waste sadly, expected more from you since you know good knowledge when it comes to flies..
So lets keep the negativity outside this thread, shall we? If not, then fxck off.
New, just because topics have been discussed before, doesn't mean we can't keep on discussing them and creating new ideas and help each other.
I actually enjoy your posts, new.. but this one was a waste sadly, expected more from you since you know good knowledge when it comes to flies..
So lets keep the negativity outside this thread, shall we? If not, then fxck off.
Thank you! This is extremely helpful!
I choose option B.
Where did you get this formula from? Of all the time I've allocated to studying butterflies I"ve never come across it.
I came across a quote from a ET vet I follow whos' knowledgable about flies "momoneythansen" or some sh!t.
He said something of the sort, "enter @ a premium of at least 10% of max profit", I want to explore this more, and find out what is an optimal % we should aim for, of course depending on our opportunity cost.
@newwurldmn I would appreciate some feedback if any, I need help man I wasn't born with knowledge like karmic cycles, I'm sorry for speaking about old subject matter, but people are born everyday and this info will keep being asked and cycled.
It comes from a strange and unusual source called - practical experience.
It's nothing to do with butterflies as such - it's a general financial principle. No books will have it, and it's far too simply for the macho, quant vomma, vanna brigade to even give it a side-ways look.
Sometimes keeping it simple is all that's needed like I alluded to in this post https://www.elitetrader.com/et/threads/how-do-you-value-vol.341175/page-3#post-5028498
I use this formula for trading calendars, straddles, commodity synthetics and also.....get this....buying properties and renting them out. When I used to purchase real-estate as an investment years ago, I didn't need fancy property valuation techniques to decide if something was a good buy - just a simple [how much rent a year will I get]/[what is the property price].
If I saw an apartment selling for $100K, and I could rent it out for $600 for a month, instantly, I knew the gross yield was 7.2%, and this was a better investment than a similar apartment selling for $90K but which would only rent for $500.
The concept of yield (or profit) vs the investment (capital at risk) is the basis of all investment.
Happy trading.
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I'm thinking a solid strategy would be to have a variety of expiration dates, especially in the higher volatility environment right now. Another consideration is management. A weekly expiration is more likely to require more "Hands on" than a "Place and forget" 6 week expiration. Term structure and personal objectives are other obvious inputs.
My preference right now is weekly OTM directional 'flys because of higher potential returns while still maintaining low risk and potentially no theta cost. I look at this type of position as a synthetic outright that has a stop built in. In the vast majority of my losing trades, my stop is triggered within hours or a day at RR's ranging from 1:1 to 3:1 plus. If my trade idea is invalidated by the movement the underlying, I take a loss, but when the trade goes in my direction over the course of a few days, my profit will be many times my potential loss, yielding a superior RR versus and outright and a stop. Further, there may be some advantages gained by looking at the underlying from a binomial perspective.