“but could you explain why you'd want to buy a fly when skew is steep? I was under the impression that a steep skew is bad for wingspreads in general, since you're paying a relatively higher premium for the wings.” You can think of two separate types of flies. One case is where you are (synthetically or outright) trade OTM/2 x ATM/OTM, which is more or less just a bet on where the underlying will end up. You are a net seller of volatility and buyer of wings. Another case (which we are discussing) is when you trade ATM/2 x OTM/OTM, so the whole fly is actually sitting toone side. You are buying ATM volatility in this case and (mostly) selling the wings. - @sle
An iron fly versus a standard butterfly with calls or puts is really the same thing. Both interest and dividends may be a factor, but those will be considered in the option prices, which means it should be the same thing again. The biggest difference is how you view them, I like to go to standard butterfly versus the iron fly, other people might prefer the iron fly, just depends on preference. The best thing to do is to put each one into your trading software and view the P&L for each, it should be the same, but fun experiment.
On the topic of 4 legged spreads,how much commission are you guys paying..I was paying as much as 6 bucks per fly at IB and went over to TOS where I am being charged 2.40..Problem is,IB is far better at executing/routing spreads...Not even close
That can't be all in.im guessing that doesn't include exchange fees Do they show market and size for flys?