Do you trade butterflies? If so, why and if not why not. By the way levered beta can be very profitable this bull market. But what if the bull goes home will butterflies be better when that happens?
First of all, I do appreciate your posts. All very helpful and relevant to someone trying to learn butterfly. Second, can you explain why the butterfly is a good trade all around? I find it very difficult to model and analyze compare to single legs. Maybe I don't have all the tools?
Thanks, appreciate it. Second, I like butterflies due to the way they allow you to structure your trades. I find them much easier to be profitable, especially in higher IV environments, than say credit spreads. I also find it fascinating to watch how the structure of the fly alters the risk. iI seems like a good way to learn more about the mechanics of options and their greeks. I use OptionVue for mine and it models them pretty well, at least as far as I need it to.
I do trade SPX fly., but I reject the notion that it is a income trade as portrayed in this cottage industry. Butterfly is just another structure to express your views. I don't do endless adjustment as they present. Anyway, it is OP's journal. I have already cluttered enough.
never had much success with 'flies -delta neutrality means no risk but profits can be pretty thin and then you have PIN risk
The effect of the initial fly will remain throughout the life of the position, whether you erase individual contracts with adjustments or not. Adjusting is simply adding additional positions to achieve another goal, given a new set of circumstances. The above points are why other posters are trying to force you to think about the initial position and the view it expresses and whether the fly at at the moment you trade it represents some type of edge. Otherwise, you should simply view the initial trade as inheriting someone else's inventory and now you're going to make the best of it going forward.
I can live with that for now. I am still trying to find the best IV parameters for entry that raise my PoP by 21 DTE. Hope the public forum will help me find it.
By all means clutter if it's a valid premise and thought process. I want people to say what they think of the trade and my thoughts on it. Need to learn.
Thank you both for your replies. I finally set up an Excel spreadsheet and started to run through some parameters. Did some very simple backtest with SPY. There is no free lunch, I still needed an opinion for it to come out positive. The most attractive part though is downside risk is bounded. I have much to learn.
Another stupid question for you and OP: Running through my Excel, the fly outcome still depends on my opinion. 132 seemed to have a better R:R than 121 and lower debit to start, so why not 143, 154 ... flies? I am not lazy and want an easy answer. I can loop through all the scenarios, but when I do that I can only see the trees instead of the forest. Best regards,