Weekly Pin Butterfly Strategy

Week 5
Entered two calendars today playing off the difference in IV from front to back months.

TWTR - Sold 2/12/21 57 put Bought 2/26/21 58 put @ $1.09
SOLO - Sold 2/12/21 9 put bought 2/29/21 9 put @ $0.40
 
Week 5 Update
Entered the following flies this morning all 2/12/21 expiration

PENN 1:3:2 call 116-122-125 @ $1.21
FUBO 1:3:2 call 47-50-51.5 @ $0.50
DDOG 1:3:2 call 116-120-122 @ $0.41
AAPL 1:3:2 call 136-140-142 @ $1.00
BYND 1:3:2 call 170-175-177.5 @ $0.85

All around highest OI strike.
Long VXX 16 call as hedge
 
Week 5 Update - Total

Calendar Spreads
SOlO $9 put calendar -2/12/21 +2/19/21 enter @ $0.40 exit at $0.32 -$0.09
TWTR $47 put calendar -2/12/21 + 2/26/21 enter @ $1.09 exit at $0.26 -$0.83

Total p/l -$0.92

Weekly Flies all 2/12/21
PENN 1:3:2 call 116-122-125 @ $1.21 exit at $0.40 -$0.81
FUBO 1:3:2 call 47-50-51.5 @ $0.50 exit @ $0.15 - $0.35
DDOG 1:3:2 call 116-120-122 @ $0.41 exit at $0.08 -$0.33
AAPL 1:3:2 call 136-140-142 @ $1.00 exit at $0.05 -$0.95
BYND 1:3:2 call 170-175-177.5 @ $0.85 exit at $1.15 + $0.30
GME 1:2:1 put 55-50-45 @ $1.50 exit @ $3.50 +$2.00

Total p/l - $0.14

Straddle
SNAP 63 enter @ $1.05 exit at $1.23 + $0.18

total p/l $0.18

Total p/l for week - $0.88

Lessons Learned
  • Wait till Thursday to enter weekly butterfly trades. Have come to the conclusion the weekly flies don't really do much until expiration day anyway. Had I waited another day would not have entered a couple that were losers. More success with wider strikes.
  • Burned again by earnings. Should have avoided DDOG but the vol was so high making the fly relatively cheap. Note to self be more careful about earnings.
  • Calendars sucked this week. Vol collapsed between strikes but the big move on TWTR earnings made it a loser and SOLO wasn't liquid enough to be filled as a winner earlier in the week. Going to take some time to study these calendars before doing more of them and just focus on the fly next week. I feel i've developed an edge with the pinning strikes and one day play. Thought I had one going screening for huge difference in IV between expiration and individual legs. Big move will always negate this I guess. Need to reflect on this.
  • Straddle was a winner again legged out when SNAP looked negative. Took profits at around 20% and was happy with that.
  • Overall week is a loser.
  • GME was the big winner and behaved with pinning tendencies. I'm going to look for more post reddit opportunities next week in these.
  • Flies are delicate to exit. They really are beautiful to watching moving around. Bad leg out exits on PENN that could have become a winner but alas I had to attend the day job and didn't want too many positions open.
Happy Trading and hope everyone has a good holiday weekend.
 
@caroy , with the stocks that have earnings in the week, like TWTR and DDOG above, do you hold your trade through the earnings?

If so, then with calendars I can tell you from personal experience that it's a game of double or nothing - if the stock doesn't move much, then ker-ching, the cal can make 100%, but if the stock moves significantly, then you get the 80% loss like in TWTR.
 
ffs1001 said:
@caroy , with the stocks that have earnings in the week, like TWTR and DDOG above, do you hold your trade through the earnings?

If so, then with calendars I can tell you from personal experience that it's a game of double or nothing - if the stock doesn't move much, then ker-ching, the cal can make 100%, but if the stock moves significantly, then you get the 80% loss like in TWTR.
More...
@ffs1001 Thanks for the input. Do you have any screener or a certain set up you look for in a calendar - call or put? difference in IV between the options? I need to learn more about successful set ups with them. Until TWTR had been doing pretty well with them just looking for a big difference between front IV and back IV but this was often tied to earnings that then produced the big price moves. Maybe I should look more at learning to trade some diagonal instead of straight calendars.
 
caroy said:
Do you have any screener or a certain set up you look for in a calendar - call or put? difference in IV between the options?
More...

Sadly, no such screener - would be nice if there was one. The ideal conditions for a calendar is rapid decay of the front 'month' vs the slow decay of the back, and this is even better if there is a large IV difference between the two, esp when we expect the front month options to have an IV decay. You are correct in that this scenario is tied to earnings, but earnings bring them with gamma risk, which is the worst thing that can happen to a calendar. So, there's no free lunch.

I assume from your post above that you did hold through earnings for both the cal (TWTR) and the fly (DDOG).

It was a brave move to so it with DDOG, esp since in the past, it has often moved 15-20% after earnings. But the risk/reward diagram does look very tempting, and all it takes is one cycle where the stock barely moves, and the profits can be huge.

For cals through earnings, have a look at the financials in April when they start reporting again (JPM, C, GS etc) - these don't tend to move much after the event. However....no free lunch and all that.... their front/back week volatility differential is very small as a result. This is not a recommendation, just something to think about.

Happy trading.
 
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