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Old Aug 9th, 2012, 08:54 PM   #43
cdcaveman
 
 
Join Date: Aug 2011
Location: Florida
Posts: 4,011
the biggest thing here is.. how can you really consider the butterflys max payout when that rarely occurs... another way to delusion yourself.. just my thoughts..
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Old Aug 10th, 2012, 01:08 PM   #44
rocky_raccoon
 
 
Join Date: Mar 2012
Posts: 153
Quote:
Quote from cdcaveman:

the biggest thing here is.. how can you really consider the butterflys max payout when that rarely occurs... another way to delusion yourself.. just my thoughts..
Exactly! 'Fly's max payout is a myth and should not be taken into consideration. However, a wide IB may be a viable strategy if the target profit is in the 10-20% range of the max risk.

E.g. SPY Sep 135/140/145 iron butterfly may be established for 3.66 credit. The risk is 1.34. Once SPY moves down to 139 or stays at 140 within next week or two, the spread can be closed for 3.40 or so. That's .26 profit per 1.34 risked or ~20%. The question is how much can one lose (besides full loss) and what is the appropriate position size.
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Old Aug 10th, 2012, 01:15 PM   #45
cdcaveman
 
 
Join Date: Aug 2011
Location: Florida
Posts: 4,011
See someone agrees with me... market isn't moving at all.... short premiumon the near term
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Old Aug 10th, 2012, 01:17 PM   #46
cdcaveman
 
 
Join Date: Aug 2011
Location: Florida
Posts: 4,011
I'd buy a weekly straddle on aapl at the close if it closes cents from a strike... sell it Monday morning
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Old Aug 10th, 2012, 01:39 PM   #47
Doobs789
 
 
Join Date: Feb 2008
Posts: 641
Quote:
Quote from cdcaveman:

the biggest thing here is.. how can you really consider the butterflys max payout when that rarely occurs... another way to delusion yourself.. just my thoughts..
I was just thinking conceptually.
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Old Aug 10th, 2012, 01:42 PM   #48
Doobs789
 
 
Join Date: Feb 2008
Posts: 641
Quote:
Quote from cdcaveman:

See someone agrees with me... market isn't moving at all.... short premiumon the near term
Vol is real cheap here. I probably wouldn't sell premium now, as vol may tick up from here next week.

On the other hand, you said that you are buying a straddle, so I guess you want to be long vol.
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