The Perfect Option position

With all due respect Maverick, you need to brush up on your synthetics.
You wrote:
Yes you could that but by being long both the 95 call and 105 call you are putting in a long bias into the position. Where as I just have bought the 105 call and the 95 put so I have no bias to direction.
Reply: We have exactly the same biases. Yes I am long 95 and 105 calls but I'm short 2 of the 100's.
You wrote:
What you are describing is the same as a long butterfly where as my position is more like a condor on the front month since I am selling the ATM straddle and buying the strangle, I am just doing it with both the calls and the puts to create neutrality
Reply: Your position is an iron butterfly.
You wrote:
With your spread I would actually want the stock to move to the wings where as with mine I want the stock to sit still, I get hurt at the wings. Thats the same as with a long butterfly, where you want the stock to rise to the sold wings to reach the maximum amount of profit.
Reply: My spread would be at maximum value (expand to 5 points) at the middle strike(100) not the wings. Maximum loss with my spread 2 dollars max gain 3 dollars. break even 98 and 102. Max gain with your front month iron fly 3 dollars max loss 2 dollars. break even 98 and 102. Like I said same risk profile.
 
Quote from dagve:

With all due respect Maverick, you need to brush up on your synthetics.
You wrote:
Yes you could that but by being long both the 95 call and 105 call you are putting in a long bias into the position. Where as I just have bought the 105 call and the 95 put so I have no bias to direction.
Reply: We have exactly the same biases. Yes I am long 95 and 105 calls but I'm short 2 of the 100's.
You wrote:
What you are describing is the same as a long butterfly where as my position is more like a condor on the front month since I am selling the ATM straddle and buying the strangle, I am just doing it with both the calls and the puts to create neutrality
Reply: Your position is an iron butterfly.
You wrote:
With your spread I would actually want the stock to move to the wings where as with mine I want the stock to sit still, I get hurt at the wings. Thats the same as with a long butterfly, where you want the stock to rise to the sold wings to reach the maximum amount of profit.
Reply: My spread would be at maximum value (expand to 5 points) at the middle strike(100) not the wings. Maximum loss with my spread 2 dollars max gain 3 dollars. break even 98 and 102. Max gain with your front month iron fly 3 dollars max loss 2 dollars. break even 98 and 102. Like I said same risk profile.
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Hey dagve, watch your tone please, I have only written about 50 posts the last 48 hours regarding this thread so my head is spinning a little here. And you need to make a distinction between a long iron butterfly and a short one. I have a short iron butterfly, sorry I did not make that specific. A long iron butterfly is the same as a short butterfly. A short iron butterfly is the same as a long butterfly. Same risk profiles. I assumed you meant long iron butterfly which wants the underlying to move to the wings. The inverse is true for a short iron butterfly which wants the underlying to stay at the center strikes.

I don't need to brush up on my synthetics, I use to have to price these in my head with guys shouting at me, that's how I learned to do them. Try that sometime.

I just know the risk profile of long iron butterfly and a short one and they ARE NOT THE SAME! Whenever one mentions just the name of a spread it is always assumed they are long it unless otherwise noted. So when you say butterfly i am going to assume long butterfly and same with iron butterfly. If you ever worked on the floor you would know that. Like I said, next time be more specific when you mention the name of a spread. Thanks.
 
A little testy when someone questions you? For your information I have priced these in my head with people screaming at me, I was a market maker on the CBOE. I understand the assumptions that are made on the floor when people talk of certain spreads.

I posted: I obviously didn't explain what I meant clear enough. I'm not advocating fly's in the back months. I wanted to point out that the fly that you recommend initiating in the front month is an iron butterfly (+1 95 p/-1 100c/-1 100p/+1 105c). I am suggesting putting on the synthetic equivalent as an alternative ( +1 95c/-2 100c/+1 105c or +1 95p/-2 100p/+1 105p). Same break even profile and greeks profile.

You replied:
Yes you could that but by being long both the 95 call and 105 call you are putting in a long bias into the position. Where as I just have bought the 105 call and the 95 put so I have no bias to direction
With your spread I would actually want the stock to move to the wings where as with mine I want the stock to sit still, I get hurt at the wings. Thats the same as with a long butterfly, where you want the stock to rise to the sold wings to reach the maximum amount of profit

Maverick why would you assume that I'm talking about a long iron fly when I spelled it out above. (+1 95 p/-1 100c/-1 100p/+1 105c)????
 
Quote from dagve:

A little testy when someone questions you? For your information I have priced these in my head with people screaming at me, I was a market maker on the CBOE. I understand the assumptions that are made on the floor when people talk of certain spreads.

I posted: I obviously didn't explain what I meant clear enough. I'm not advocating fly's in the back months. I wanted to point out that the fly that you recommend initiating in the front month is an iron butterfly (+1 95 p/-1 100c/-1 100p/+1 105c). I am suggesting putting on the synthetic equivalent as an alternative ( +1 95c/-2 100c/+1 105c or +1 95p/-2 100p/+1 105p). Same break even profile and greeks profile.

You replied:
Yes you could that but by being long both the 95 call and 105 call you are putting in a long bias into the position. Where as I just have bought the 105 call and the 95 put so I have no bias to direction
With your spread I would actually want the stock to move to the wings where as with mine I want the stock to sit still, I get hurt at the wings. Thats the same as with a long butterfly, where you want the stock to rise to the sold wings to reach the maximum amount of profit

Maverick why would you assume that I'm talking about a long iron fly when I spelled it out above. (+1 95 p/-1 100c/-1 100p/+1 105c)????
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Because when you read through these posts as fast as I do, sometimes I don't go over each number a poster has especially when someone calls it a butterfly or a condor or a straddle and so on. When you say iron butterfly I think long iron butterfly. My position is NOT a long iron butterfly. I have had many people make this confusion on the calendar thread as well. When someone says calendar it is assumed long calendar unless you say otherwise. I just looked at your post after you said iron butterfly and skimmed over your example and noted I did not want my position to go to strikes as you would with a long iron butterfly. I am deeply confused why you are even jumping all over this. All I am asking you or anyone to do is when you call out a spread name, make sure you get specify short if you mean short. Don't just say butterfly or straddle or condor and assume I know you mean short condor. I am not being testy, it's just that there is a huge difference between the two and many people on this board do not know the difference between them so terminology IS important.

My suggestion is drink a beer and relax and stop trying to point out flaws in other people's posts. I should have looked over your numbers you posted but didn't. Had I known you were going to throw it in my face I would have. Again, my position is like a SHORT iron butterfly.
 
My suggestion is drink a beer and relax and stop trying to point out flaws in other people's posts

This couldn't be further from the truth as evidenced by the total amount of my posts as compared to the total amount of idiotic statements that are made in the option threads. If you read my original post I was simply pointing out an alternative, not trying to throw crap in your face. Only when you replied in a way that did not make sense did I question you personally. peace
 
Quote from dagve:

My suggestion is drink a beer and relax and stop trying to point out flaws in other people's posts

This couldn't be further from the truth as evidenced by the total amount of my posts as compared to the total amount of idiotic statements that are made in the option threads. If you read my original post I was simply pointing out an alternative, not trying to throw crap in your face. Only when you replied in a way that did not make sense did I question you personally. peace
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Idiotic statements? Well, don't bother reading any non option posts then. I would say the option boards are of the highest quality on ET and I am trying to keep it that way. Most of ET has really gone downhill where people are attacking each other and their trading ideas or just plain writing nonsense. I consider most of the option posters to be of very high caliber and their posts to be of very high quality. Sure there are some newbies who state they are newbies and ask very basic questions but that's what these boards are for. I hope they continue to post and ask questions.

However when you post one thing and call it something else as with an iron butterfly, you open the door up for mass confusion. I wish you simply would have re-read your post and correctly called it a short iron butterfly instead of telling me to brush up on my synthetics. There, I said my peace.
 
Quote from Bruto Blukowski:

A nice PDF outline of Recognized Strategies.(I don't see any Willy Wonka Wrangle)

www.cbot.com/cbot/docs/41623.pdf
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Bruto, this might help you out.

http://www.amazon.com/gp/reader/047...800-7191014?_encoding=UTF8&p=S05X#reader-page

Keep clicking till you get to the last page for W's and you'll see wrangle. Buy the book, it's in there. I highly recommend this book, in fact, I rate it even higher then Natenburg's book "Option Volatility and Pricing."

This link might also help you.

http://www.riskglossary.com/articles/options_spread.htm#wrangle spread

Anything else I can do for you?
 
Quote from GATrader:

But this spread assumes that you can put the fly in the front month for credit. Which is a huge assumption correct? Unless you are selling straddles and a week later buying the wings to get a good straddle price. Even when I was on the floor getting free flies is not a lay up! Am i missing something? The only other way to get this kind of position is to do ratio calendars betweens months with huge smile profiles.
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GATrader, I am an options newbie, but I have done a few trades with ratio calendars to achieve the "smile profit" profile that you mentioned. I was doing this on indexes...but the problem was the volatility was just getting sucked out of the market and hence I was not profitable. My question is, can you neutralize the vega effect on such a position with something like a short butterfly ? In the meantime you will be collecting theta on both positions.

Again, I'm a newbie so I may have scrambled up the terms....my apologies in advance.

Thanks
 
You could neutralize vega by shorting butterflies. Maverick had tons of stuff about short flies, excellent posts about it too. However, bear in mind that for every order you put out there are people equally if not more sophisticated taking the other side of the trades so all things being equal, freebies such as flies for credit, ratio at good biases are hard to come by. You could achieve such things by 1 . being on the floor, buying on bid.selling on offer, 2. aggresivelly legging on to them-buying the calls legs when mkt rallies 5 minutes later selling the call legs when mkt tops out. 3. selling premium waiting days then buying the long legs ,etc . Good luck
 
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