.sigma's butterfly book
- Thread starter .sigma
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Entered this 121putfly 4/3, expires tomorrow. Most likely a wash, it happens..
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$MSFT 30-Min
$MSFT Daily
MSFT made a nice move up with the rest of the market on Monday, I'm down about a buck on this spread. Going to let it ride until expiration, although it is at a resistance level at $165/share, so we'll see if it reverts back suddenly today or tomorrow. The magnitude of these moves in the single-names are crazy magnified.
I "should" of sold the guts at 160, not 155, I did not see the VVA I just sold ATM blind, I get lazy sometimesand just hit send wrecklessly. This fly is currently quoted @1.76
peep the technicalz
$MSFT 30-Min
$MSFT Daily
MSFT made a nice move up with the rest of the market on Monday, I'm down about a buck on this spread. Going to let it ride until expiration, although it is at a resistance level at $165/share, so we'll see if it reverts back suddenly today or tomorrow. The magnitude of these moves in the single-names are crazy magnified.
I "should" of sold the guts at 160, not 155, I did not see the VVA I just sold ATM blind, I get lazy sometimesand just hit send wrecklessly. This fly is currently quoted @1.76
Of course, the most risk is in the legging in. Describing the net cost of the resulting butterfly as done at a net credit might be technically true, but it still would be a misnomer and best accounted for as separate trades, in my opinion.
I agree that "Hard" arbitrages don't exist. However, "Soft" arbitrages in the relationships of financial instruments bound together in some way are still available at times. Top of mind, I'm thinking of various instruments and spreads of instruments that are associated with risk taking or risk avoidance.
There are also monetary and geopolitical correlations that can provide opportunities outright or may need to have other variables such as economic inputs accounted for in estimating the longer term central tendency of certain pricing relationships. I believe the less direct the analysis, the greater potential for a significant mispricing.
I'm using the term arbitrage a little loosely, but the term statistical arbitrage exists. It comes down to attempting to exploit an apparent asset mispricing that is facing some form of fundamental pressure to come back in line. One can usually find a way to mostly isolate the trade idea from unwanted directional risk and structure the trade to focus on the mispricing itself.
Speaking only for my trading goals, when I have sufficient time to actively trade the market and can generate additional alpha while adjusting my hedges on my overnight option spreads, why not?
Compounding edges from term structure, skew, intraday statistical arbitrage opportunities, and order entry strategies can only increase overall trading performance in the long term. I wish to avoid getting the worse of it even over a short time frame. For example, before putting on a option spread that I am willing to take on delta exposure, I notice an unfavorable situation in the book of the underlying. By waiting for that unfavorable situation to clear, I may be able to get a better fill than what would otherwise be the case, but even here, such efforts are not without risk on any particular trade.
How do you do 143's? I thought as a combo they're not possible (as leg ratio cannot exceed 1:3)...
good question... I have no idea..maybe des could chime in if he sees this post, or @Same Lazy Element or @Doobs789
It depends on the product, but you can just leg into the fly as well.
Why not skip a few strikes between the higher priced leg and the body, or accept, I can't think of a better term right now, a asymmetric payoff?