Take it easy on me here. I can not see the edge in trading a stand alone fly. Yes you are short gamma (usually overpriced), but to realize over priced gamma you need to delta hedge. Flys get directional very quickly. Vega is very low on flies and so a decrease in vol will usually not compensate for your loss in gamma. To make the returns Destario makes you have to have an idea on where it will pin and of course buy them when vol is relatively high. Not the easiest game to play
There is a lot that I can't reveal, so I can't really respond with methodology other than to state that I don't throw darts at a board. A fly, whatever the construct, is simply as tool. They're interesting as they're bimodal to all first-order greeks (obv not long in large mag to gamma and vega) and can exploit skew due to their "verticality." You cannot replicate the exposure with any other spread or combo. I would've retired inside a year if I could pin with precision. No payoff is higher than a pinned fly. All I can show is the real-time NBBO on entries and exits; adding a little color. I have a client that went from $800K to $12MM. I don't think he's ever traded anything but 132/231s.
@destriero are we still in the amazon trade? the fly past your in body strike today, was there any delta hedging?
I think he exited - at $700 profit due to the short 150 AMZN shares. Check out his Journal thread. I posted a question to his Journal thread for more info. https://www.elitetrader.com/et/thre...arb-atticus-et-al.319977/page-17#post-4677296
One thing about flies--it's a tool. There are modalities that dictate fly vs. calendar. vs. whatever. You don't buy calendars if you're looking to trade gamma. There are better choices to isolate gamma. Flies are my go to because of the granularity and ability to embed. why buy an ATM 70 call at 3.30 when you can buy the 70/80/90 fly for 1.80?