You gotta watch the vols on butterflies also - if the vols fly then you're toast. I prefer calendars or iron butterflies for my "stay still" strategies.
You're way behind me Dan. I noticed his resurrection on his second or third post, when he suggested that Surf's female admirers did not exist. Ever on the lookout for resurrected option deities, Emilio
Thank you all for your insights. I have a few more questions. atticus: You wrote "The SD implied by the atm straddle suggests a $2 range to expiration and you'd like a better return on a defined-risk position with 35% volatility?" My translation of your statement is: ATM strike in my example (one wing actually) is the Apr 30 put with 37% implied volatility, and the standard deviation (SD) of the price suggest a range of $2 centered on ATM strike ($30), and there is low probability of reaching middle strike of $35. Am I right? Where does the straddle come from? Or are you thinking iron butterfly? cdowis: I placed a butterfly on RUT and a condor on SPX. I have also watched the webcast. Thank you. RS
Sorry, that's not the case - probably a symantics(sp?) issue here. By iron butterfly I mean you are short at two different strikes, with your long wings positioned accordingly. Using calls this would be a bull call spread positioned with a bear call spread. Perhaps this is referred to sometimes as a condor. For a regular butterly, yes you are short only one strike. Who knows, I just trade!
If the short strikes are different then it is a Condor, or in your case it seems you are referring to Iron Condor.
entering flies as a one time strategy is silly. the fly is a usual destination trade when you start off with outright calls or puts and begin taking risk off the table by selling premium against that holding. in the end you might end up with a riskless fly or similar position. that would yield positive expectancy in the long run. but entering flies as single order is just giving away money to market makers and exchanges. your odds are very negative (due to amplified slippage and comms) and, in the long run, that will inevitably dictate your negative P/L, no matter who good your crystal ball is.
I was referring to an OTC straddle struck at spot. I use a straddle at spot to derive fly valuations. The 31.50 straddle would be trading at 200 in the otc markets. Don't trade flies with significant deltas unless you're trading direction.
There are no riskless butterflies. What you mean is that you pay for the fly by (partly) using the gains you made on the previous short sell. You could also pocket that profit, but instead you decide to buy a fly now. What happened in the past does not make a new position riskless. Ursa..