"Vacation Spreads"

[beerntrading]

I've heard of butterflies referred to as vacation spreads before. I'm wondering if anyone has any experience with them. I absolutely hate holiday weeks for weekly options trades--never once had a winning week, so that keeps me out of next week's action. And the week after that, I'm leaving Thursday and through the third week of July.

Just a cursory look at using this strategy, I'm thinking I want to have a mix of net long and net short positions with expiry at least as far out as August. But this isn't my wheelhouse, and I figure asking here may well prevent me learning a lesson the hard way.

Anyone else use this strategy? Do you prefer long or short, iron or no, further / closer expiry? Does expiry change for net long / short positions?

Also, it's a super boozy week on the beach, and I have gotten a Fed call before after forgetting to close the Friday expiry--so anything before 7/28 is off the table for me.

 

[mushinseeker]

I guess flies and condors can be good vacation spreads a long as they don't expire during your vacation week where you don't have access to your account. You need to have access to your account in case the stock settles close to your short strike and you have to deal with assignment.

 

[beerntrading]

I guess flies and condors can be good vacation spreads a long as they don't expire during your vacation week where you don't have access to your account. You need to have access to your account in case the stock settles close to your short strike and you have to deal with assignment.

Thanks. I've already learned that lesson the hard way--there's no fed call quite like the one you receive on the hungover Monday on your first day back from vacation!

 

[beerntrading]

"butterflies" as a "strategy" is about as specific as stating "I just want to make money". Can you be specific?

Well, I'm open to ideas here. I'm looking at 7/28 and 8/18 expirations. I'm ambivalent to long vs. short...though with slight modifications to strategy depending. If short, I'd look for a longer term fly so if there's an adverse price move, I could wait it out. If long, I'd be looking to close the position on return if profitable, or let it ride if not--so expiry less important here.

That's the thing, I see a whole range strategies and I'm inquiring on other's experiences. I'm leaning towards a net long portfolio while I'm out just because I think 2450 is inflection and we're likely to see a move over those three week, just not sure which way. But I'd be happy to take on some dividend dinosaurs on the short side too and let the time decay fill my pockets.

 

[mushinseeker]

If you think 2450 is an inflection and you have a little inkling up or down, then put on some skipped strike flies. The asymetrical fly has much better returns if you are willing to stick you neck out a little bit as to direction.

 

[stepandfetchit]

IMO: There are so so many approaches (most of which have serious flaws), finding one or more that is agreeable to your own "criteria" is mind-numbing! The most difficult task being determining what your own "criteria" is in sufficient actionable terms!
I now trade SPX Road Trip Trades, which match my criteria of "maintenance effort", Equity curve smoothness (insert better term here). It has kind of a "ho-hum" (but positive) return, but is a good stepping stone for me, on my current path. It is a bearish leaning BWB initiated with 70-80 DTE. -- These are layered each 2 weeks for 4-6 positions outstanding at a time. There are similar trades with less DTE and time in the trade, that may be more attractive from a return perspective.

 

[beerntrading]

If you think 2450 is an inflection and you have a little inkling up or down, then put on some skipped strike flies. The asymetrical fly has much better returns if you are willing to stick you neck out a little bit as to direction.

Yup, I've given this and outright vertical spreads consideration. Definitely in my playbook (also asymmetrical the other way, with a 1-3-2 arrangement).

IMO: There are so so many approaches (most of which have serious flaws), finding one or more that is agreeable to your own "criteria" is mind-numbing! The most difficult task being determining what your own "criteria" is in sufficient actionable terms!

True enough! My criteria is pretty straight forward, and I can spot this in the chains themselves. So that's the easy part here.

One I've considered is a long fly / condor on SPX / SPY, and shorts over stuff like KO, MO, PM, PG...

 

[tommcginnis]

Buy calendars above and below the market,
with the near-er term expiry right after you get back.
Margin exposure: $0.00
Directional bias: zero.
If volatility climbs, your long is good.
If volatility falls, you let the shorts expire, and then sell a closer-in strike upon your return, creating a standard vertical.

The only thing I'd be short is in equity puts that I intended to own. NO other shorts....Black Swans -- we *know* they occur, but we just *can't* tell when!

In August of 2015, I spent $1k to exit bottom-side positions in the SPX that I had *no* rational reason to fear. Went up into the mountains. No-ooooo signal. When we returned back down to town, I learned that China had re-valued the yuan, and we'd sunk 80-90 points, and were still headed further down. I would've been underwater by 30-50 points.

Here in 2017, we've got The Orange-utan in the White House, looking for new & exciting ways to ruin a powerful agenda and squander "unified government." What if he turns it around?? What if, just for grins, he becomes an anticipatory tactician, instead of a reactionary punchline? We could pop, NO LIE, another 50 S&P pts in 48 hours. I would have *no* doubt of that. And would it be expected? Nope. Is it yet, still, entirely *possible*??? Yep.

My conclusion? Up or down, in 2017, it's a danger to take a short position and then go on vacation. (Exception as noted above.)

 

[beerntrading]

Buy calendars above and below the market,
with the near-er term expiry right after you get back.
Margin exposure: $0.00
Directional bias: zero.
If volatility climbs, your long is good.
If volatility falls, you let the shorts expire, and then sell a closer-in strike upon your return, creating a standard vertical.

The only thing I'd be short is in equity puts that I intended to own. NO other shorts....Black Swans -- we *know* they occur, but we just *can't* tell when!

In August of 2015, I spent $1k to exit bottom-side positions in the SPX that I had *no* rational reason to fear. Went up into the mountains. No-ooooo signal. When we returned back down to town, I learned that China had re-valued the yuan, and we'd sunk 80-90 points, and were still headed further down. I would've been underwater by 30-50 points.

Here in 2017, we've got The Orange-utan in the White House, looking for new & exciting ways to ruin a powerful agenda and squander "unified government." What if he turns it around?? What if, just for grins, he becomes an anticipatory tactician, instead of a reactionary punchline? We could pop, NO LIE, another 50 S&P pts in 48 hours. I would have *no* doubt of that. And would it be expected? Nope. Is it yet, still, entirely *possible*??? Yep.

My conclusion? Up or down, in 2017, it's a danger to take a short position and then go on vacation. (Exception as noted above.)

Lol.... Orange-utan.

As for your strategy--I like the nice wide bell curve over the break-evens. But, what if we dump 100 points on the SPX (for example)? For an example of 2430 & 2450 strikes with July 28 short and Aug 18 long, we're at 2340 on July 24 and the VIX is up to 19. I'm looking at an $11-ish loss. How do you handle that situation?

And if I were to go short, it'd be net short spread, flies, or condors. I'd never leave a sky-clad position open unless I plan to take assignment if it moves against me or purchase the shares that I would have been assigned regardless.

 

[tommcginnis]

1) As for your strategy--I like the nice wide bell curve over the break-evens. But, what if we dump 100 points on the SPX (for example)? For an example of 2430 & 2450 strikes with July 28 short and Aug 18 long, we're at 2340 on July 24 and the VIX is up to 19. I'm looking at an $11-ish loss. How do you handle that situation?

2) And if I were to go short, it'd be net short spread, flies, or condors. I'd never leave a sky-clad position open unless I plan to take assignment if it moves against me or purchase the shares that I would have been assigned regardless.

2) I don't understand....
But,
1) "Oh! The Secret Sauce!" You sell the Jul 20,Jul21, OR you sell the Aug17,Aug18 {of whatever strike}. Should the market approach your puts, the increase in vol will still work in your favor. If you're back to your desk, you can now actually turn both expiries into verticals, or just sell-to-close, as you wish. If the market climbs towards your calls, pretty much the same thing goes.

Should the market "go away" from you,
a) it's a long position -- you're only out the debit.
b) if you utilize this new Third-Week Friday dealie, the difference on Thursday will be ~ what you might've paid to enter. "Woot!"
c) if you wish, you can *still* turn them into own-expiry verticals -- you simply paid your 10¢-20¢ entry a week or six early.

Now, can you beat that with a stick?
I don't know how long it will last, but while vol is low, and this is presented, I'm on board.
I invested about $200 last month, and got between $400-$500. Looking at $500 this month, and while not expecting to double, ...... I won't argue with it either. If things work nicely again, expecting to spend $1000 next month.

I'm not much of an option buyer, but..... sheeesh. Low vol, low risk, low stress.... and while they keep up that Thursday/Friday expiration stuff.... I'll sign on.