I'm just asking because it looks like a typo in the original post. Buying premium in the wings. Long the wings.
There's something so satisfying about having one of those 5 delta options go in the money when it happens... feels like hitting the lottery. Unfortunately, as we all know (or find out), there's a reason its a 5 delta.... I would not be surprised to discover that if I truly accounted all my flyers that I really had not done anything except break even, or even then some. Nevertheless, with a catalyst, when everything falls into plan, still is an awesome play!
I think he meant "putting on the wings" instead of "putting in the wings." In any case, the idea is to be long wings as a sort of "safety net" in case of a black swan event. There are other good reasons to be long wings as well.
Its really not an awesome play. You'll lose more over time then you'll make on the rare itm. Those options are not bought by professionals in hopes they go in the money they have other uses in more complex strategies and money management. Nor would a professional sit there an hold one through a monster rally in hopes it ended up in the money.
dmo is right as usual. beatingthesp, you have a habit of looking at positions in a very limited and one dimensional way, as you learn more about options hopefully youâll be able to expand your ability to think in more then a single dimension options wise.. No one is suggesting buying the wings and hoping they work out. There are various other strategies and protections the wings provide as well as being a money management tool.
It's a MMers nightmare to end up long a bunch of 5-delta garbage in which they trade flat with spot. It always seems that stat vol goes to zero immediately after going long garbage. I know of one local who bought a few thousand 5-10D calls and got flat with short spot a week before expiration. Of course, spot crept higher and he blew out a day before expiration.
I don't buy them hoping they work out. I buy them for the exact reason dmo points out. Was just looking for a clarification of a typo.
Remember that movie "Gremlins?" I used to trade with a guy who compared options to Gremlins - with a lot of time remaining they're these cute, adorable, harmless creatures. Then as expiration approaches, somebody exposes them to bright light. A few days later somebody gets them wet. And with a week or so remaining somebody feeds them after midnight - and suddenly they turn into vicious monsters that'll eat you alive.