Swing trading with Butterflies

Adam777 said:
Hi Global OptionsTrades

Are you now mainly trading OTM baby flies? It's good to see your returns improved
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Thanks @Adam777

I'm swing trading using vertical spreads with longer durations than the trades that have ended up on this journal, then using flies and calendar spreads which are here.

Set-ups dried up for a couple of weeks during August, and I got out of the habit of reporting trades here when the set-ups were more solid last week.

Got some holiday time for a couple of weeks during September so will probably pick up on reporting trades here when back.
 
Global OptionsTrades said:
Thanks @Adam777

I'm swing trading using vertical spreads with longer durations than the trades that have ended up on this journal, then using flies and calendar spreads which are here.

Set-ups dried up for a couple of weeks during August, and I got out of the habit of reporting trades here when the set-ups were more solid last week.

Got some holiday time for a couple of weeks during September so will probably pick up on reporting trades here when back.
More...

Yes we all need those holidays!
 
Back from the beach and pleased to see that my attempts to hedge a long portfolio held up well.

In addition, popped a couple of calendars on yesterday:

Trade date: 26 September 2022
Security: RUT
Price at opening: 1667.0
Direction: Put
Expiry date (short side): 30 September 2022
Implied Vol (short side) 43.8%
Expiry date (long side): 03 October 2022
Implied Vol (long side) 37.0%
Strikes: 1660
Opening Spread: 3.35

Trade date: 26 September 2022
Security: SPX
Price at opening: 3672.0
Direction: Put
Expiry date (short side): 30 September 2022
Implied Vol (short side) 35.1%
Expiry date (long side): 03 October 2022
Implied Vol (long side) 29.8%
Strikes: 3670
Opening Spread: 6.25

Also, opened a fly on AMZN today for expiry on Friday:

Trade date: 27 September 2022
Security: AMZN
Price at opening: 116.1
Implied Vol 54.6%
Direction: Put
Expiry date: 30 September 2022
Strikes: 110 / 115 / 120
Structure: 1 / 2 / 1
Opening Spread: 1.59
 
Closing orders for The Russell 2000 Calendar filled and I'm expecting to close the others later today or tomorrow.

Trade date: 26 September 2022
Security: RUT
Price at opening: 1667.0
Direction: Put
Expiry date (short side): 30 September 2022
Implied Vol (short side) 43.8%
Expiry date (long side): 03 October 2022
Implied Vol (long side) 37.0%
Strikes: 1660
Opening Spread: 3.35
Close date: 29 September 2022
Trade duration: 3
Closing spread: 5.90
Profit / (Loss): 2.55
Profit / (Loss): 76.1%
 
AMZN fly and SPX Calendar both closed yesterday at a profit. A good week :D

Trade date: 27 September 2022
Security: AMZN
Price at opening: 116.1
Implied Vol 54.6%
Direction: Put
Expiry date: 30 September 2022
Strikes: 110 / 115 / 120
Structure: 1 / 2 / 1
Opening Spread: 1.59
Close date: 29 September 2022
Trade duration: 2
Closing spread: 2.01
Profit / (Loss): 0.42
Profit / (Loss): 26.4%

Trade date: 26 September 2022
Security: SPX
Price at opening: 3672.0
Direction: Put
Expiry date (short side): 30 September 2022
Implied Vol (short side) 35.1%
Expiry date (long side): 03 October 2022
Implied Vol (long side) 29.8%
Strikes: 3670
Opening Spread: 6.25
Close date: 29 September 2022
Trade duration: 3
Closing spread: 11.50
Profit / (Loss): 5.25
Profit / (Loss): 84.0%
 
A couple of questions if you can.
I read that you also trade longer term verticals. Do you ever convert them into riskless fly's?
Do you use any scanner to pick your calendars and fly's or is it all manual/visual work?
 
Thanks @cesfx

Q: I read that you also trade longer term verticals. Do you ever convert them into riskless fly's?

A: I do, and I haven't. Something for me to consider though. Can you share a practical example pls?

Q: Do you use any scanner to pick your calendars and fly's or is it all manual/visual work?

A: Its a pretty manual process, but relying heavily on Excel for entry set-ups and simulation for exits.
 
Global OptionsTrades said:
Thanks @cesfx

Q: I read that you also trade longer term verticals. Do you ever convert them into riskless fly's?

A: I do, and I haven't. Something for me to consider though. Can you share a practical example pls?

Q: Do you use any scanner to pick your calendars and fly's or is it all manual/visual work?

A: Its a pretty manual process, but relying heavily on Excel for entry set-ups and simulation for exits.
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Thanks for you reply.

An example about a conversion:
Spx at 3650, buy Spx bull call 3650/3700 cost 25$ debit.
Spx goes up 100+ point approx.
Add a ITM bear call 3700/3750 with the same width, and the same leg short:
sell 3700 call, buy 3750 call, for a credit of let's say -28$.
That would convert it into a butterfly for a total of -3$ credit.

I have no experience trading them as I normally would take the profit before on a debit spread.
 
If the upper vertical had edge and you wanted to flatten delta,why not..

I wouldn't look at it as legging into a fly,I would be looking at the most efficient way to reduce delta(hedge) or take profit

cesfx said:
Thanks for you reply.

An example about a conversion:
Spx at 3650, buy Spx bull call 3650/3700 cost 25$ debit.
Spx goes up 100+ point approx.
Add a ITM bear call 3700/3750 with the same width, and the same leg short:
sell 3700 call, buy 3750 call, for a credit of let's say -28$.
That would convert it into a butterfly for a total of -3$ credit.

I have no experience trading them as I normally would take the profit before on a debit spread.
More...
 
Thanks for the example @cesfx

A couple of thoughts:
  • after the 100-point rise, my temptation would also be to take the almost`100% profit (depending on dte) and close the position. But I'll explore the fly conversion further and run some simulations.
  • a minor point perhaps, and I appreciate that your example was just an example, but both the initial trade and the conversion trade require one to purchase an AtM Call so 50-delta. When opening verticals I try to sell the 50-delta, buying ItM or OtM depending on objective, skew, etc. This would change the dynamic for converting to a fly, but again, I'll think about it and model, simulate, backtest it.
Thanks again though - every day is a school day!
 
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