Destriero - Butterfly Trades

Discussion in 'Options' started by ironchef, Dec 11, 2020.

  1. #71     Dec 16, 2020
  2. speedo

    speedo

    Bold was he who ate the first oyster.
     
    #72     Dec 16, 2020
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  3. Magic

    Magic

    How do you decide position sizing for unlimited risk structures like 1x3’s?

    Also what annual avg returns on net liq do you think are a reasonable expectation trading skew dynamics and trying to sell vol near a local max in single names?

    Seems like returns are hard to come by in SN unless I get the delta lean right or there is a rare dislocation. My PnL on net short gamma seems to largely level out for me after enough trades from the inevitable outlier moves that occur. In calmer markets I am starting to wonder if the short vol beta is even worth chasing for retail.

    Lastly what expirations do you think have the most edge? Is the front few weeks usually more attractive or do you trade several months back commonly?

    Thanks for posting here about options, you are one of the guys that comes across as knowing your stuff.
     
    #73     Dec 16, 2020
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  4. easymon1

    easymon1

    What Option Chain column headings / settings build the picture that alerts you to an outlier?

    Would you consider posting a screenshot of an outlier occurance in action?

     
    #74     Dec 16, 2020
  5. .sigma

    .sigma

    Lets think about it for a second.

    A butterfly is one of the more interesting spreads. Why? Well for one, a butterfly is just a hedged straddle. The straddle is another spread thats more "interesting" than the rest, why? Because the ATM straddle is the markets way of pricing the magnitude of movement.

    When the neophyte enters the option arena its quickly apparent this industry has a fascination with the iron condor. Why is this? You see a plethora of info on condors, yet no where near as much info on the fly? Why?

    People might be disillusioned on thinking the condor is a "safer wager" than the fly. Your margin of error is larger, yet this comes with its own R/R.

    I think its important not to look at option spread trades via the terminal distribution. A trader should always take a percentage of the R:R and manage early. IMO I'd rather buy an ATM weekly fly in $AAPL 10-wingwidth and manage at 25% max profit, than selling a condor OTM.

    Your R:R is much better, with the ATM fly you are short the guts (selling peak gamma) unlike an OTM condor.

    Also maybe someone can offer some advice, but in my experience I don't see the point in trading fly spreads >30DTE but even 30 days is too much. This spread is more geared for weekly expirations. Since the fly is "numb" to the greeks across the board, things start accelerating the last few days, thus its crucial to manage the fly before hand.
     
    #75     Dec 16, 2020
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  6. #76     Dec 16, 2020
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  7. easymon1

    easymon1

    Last edited: Dec 17, 2020
    #77     Dec 17, 2020
  8. .sigma

    .sigma

    #78     Dec 17, 2020
  9. Hedged short straddle.
     
    #79     Dec 17, 2020
    .sigma likes this.
  10. easymon1

    easymon1

    can you be more specific?
     
    #80     Dec 17, 2020