Assuming you're not being snarky, you're welcome. I think of it far more as "sharing what I've learned" than "coaching"; to me, that's the main purpose of forums like this one. Big fan of cooperative synergy, here.
taking longs out of a fly
- Thread starter Baozi
- Start date
Assuming you're not being snarky, you're welcome. I think of it far more as "sharing what I've learned" than "coaching"; to me, that's the main purpose of forums like this one. Big fan of cooperative synergy, here.
Not snarky at all. I need lots of help. I am just a one trick pony and that trick may not be working anymore.
Amen. That is my problem.
@ironchef actually after a few dozens trials in the simulator I think I got a satisfactory solution to my conundrum.
Brief recap of the scenario: my fly is a 231 call fly so there is one itm strike at twice the distance from the body compared to the outer strike. the structure went up mainly due to very favorable skew, so risk/reward ratio is very good, despite the fact that longer dte makes the profit graph look like a flat line.
Expecting reversal to normal trading range, I have seen that the best possible adjustment would be to bring the deep itm strike closer so that its equidistant from the body. Delta goes from 0.9 to 0.8, so in the unlikely event the underlying continues to rise the loss is still very small. In the other case you have a sure profit. Now please point out the leak(s) in my reasoning. If you want I can post a screenshot of the graph before/after adjustment
Brief recap of the scenario: my fly is a 231 call fly so there is one itm strike at twice the distance from the body compared to the outer strike. the structure went up mainly due to very favorable skew, so risk/reward ratio is very good, despite the fact that longer dte makes the profit graph look like a flat line.
Expecting reversal to normal trading range, I have seen that the best possible adjustment would be to bring the deep itm strike closer so that its equidistant from the body. Delta goes from 0.9 to 0.8, so in the unlikely event the underlying continues to rise the loss is still very small. In the other case you have a sure profit. Now please point out the leak(s) in my reasoning. If you want I can post a screenshot of the graph before/after adjustment
Sounds like you sold an ITM call vertical ( bought OTM put vertical ) to convert position to BWB
... screenshots always useful to look at if you have them
I'd actually like to see that graph. Also, which simulator are you using?
ok so here there are the two screenshots.
I use optionscreator.com, as my brokerage simulator is Sh*t.
before, 132 call fly:
after, similar to a broken wing fly:
clearly if the rally continues the position loses money, but very slowly due to the fact that the strike that I moved closer to the body is still ITM.
I use optionscreator.com, as my brokerage simulator is Sh*t.
before, 132 call fly:
after, similar to a broken wing fly:
clearly if the rally continues the position loses money, but very slowly due to the fact that the strike that I moved closer to the body is still ITM.
You may have already seen it, but Charles Cottle provides a good explanation of the structure of 123 ( SkipStrike ) Flies and other similar configurations in the chapter in his book on WingSpreads
There is some real benefit in dissecting your positions into embedded flies-verticals-outrights
... particularly if you are intending to 'adjust' the position as Spot/Vol change over time