Any ideas of position decribed?

Discussion in 'Options' started by Dael, Nov 30, 2011.

  1. Dael


    Hello, option gurus.
    Some of you has years of options experience.
    I want to ask you to share your thoughts.

    I've got a teaser video screenshot, where a pro option trader gave a view on his new position. It was some spread transformed into something new with this PnL profile (attached).

    Any ideas of what exact (or estimated) trades could be inside the position? Looks pretty nice, isn't it? Constant profit on current and above price with hilarious opportunity to make a pile of money on the downside move.
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  2. daveyc


    well, i am no guru. this is a broken wing butterfly on rut and the distortion in the shape of the butterfly is because it looks like he has been selling closer to the money spreads as the trade passed time. hard to see the pic clearly. this is a strategy that i like a lot and is very flexible. consider, perhaps, opening this trade with a debit and work it that way too, for additional safety.

    side note. the p/l may not be accurate as you see it because as you close the spreads it will mess up the p/l as you see then in the analyze tab in tos. hope that makes sense.
  3. spindr0


    Yep, looks like a broken wing. The distortion in the graph implies either a secondary option position or a charting program that needs a better programmer.
  4. Maverick74


    I use to trade these all the time. They are +1 x -3 x +2 spreads. There is no skipped strike or broken wing. I use to call them elongated flys. You are simply taking the original debit of the fly and moving it to the back of the fly. So instead of paying for it in the front end, you are paying for it in the back end.
  5. spindr0


    There are multiple ways to achieve a profit graph. Neither your explanation or the BWB explains why the right side of the inverted V isn't a straight line.
  6. Maverick74


    It is a straight line.

    TOS has blurry graphs when two lines converge like that.
  7. Dael


    Thank you all for the input.
    Well here's another screenshot (sorry for the quality - got no better).
    This is PnL profile with some time improvement - December, 12 (and previous was with November, 30).
    See next post (have no idea how to attach more than one file here on ET).
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  8. Maverick74


    Yes, that's better. And you can clearly see the net credit on the right side being a straight line. It's a 1 x 3 x 2 spread. Nothing secret here. You just have to deal with the bigger risk on the tail end.
  9. Dael


    So here's my risk profile for RUT and +1 -3 +2 spread.
    White line set to Dec 12 and have no common at all with that cool profit in the original.

    Update. Sorry. In order to get similarity I have to build spread on JAN12 options, because author could open his spread in November on DEC11.

    So as far as I and others see, it's a 1-3-2 spread.

    If I'll get any crystal info from the author, I'll do some input here.

  10. Maverick74


    It's the same thing. Stretch the graph out more so you are comparing the same size graph. Trust me, it's exactly the same.
    #10     Dec 1, 2011