Hi dest. On the AAPL butterfly trade, you mentioned a possible tendency of the price to stick to VWAP, which actually materialized. Could you elaborate on the VWAP anchoring please? I mean how many days to include in VWAP calculation, and whether to avoid overnight volume or not. I think even a more important question is to know when VWAP matters and when it does not. Am I thinking correctly?
A confluence of signal generation, vol-targets and experience. There is no way to say it w/o sounding like a nose-bleed. It's easy to choose the proximal strike, but what good is it if we blow through it and invert delta? Generally I go farther OTM on fly bodies or any structure that can invert.
sorry dest, the language is too advanced for me man. Please excuse my primitive question. To avoid the risk of deltas inverting you suggest, 1-we widen the body of the delta neutral fly (ITM-ATM-OTM)? 2- or you mean we should start with directional fly (ATM-OTM-more OTM)?
Don't trade flies directionally if you think there is large risk of inversion. I can't tell you where to place the body. A wide ATM diagonal may be a better option on direction. (If fly/then) stress any fly at neutrality (body strike or fwd) at day one. If you're satisfied with the PNL then trade it. If not, then choose something unimodal; vert, diagonal, singles. Rule of thumb. Never trade an ATM diag if prem > strike width. If so, you're paying too much for the switch (vol-diff) or you're too close to exp (too much position gamma).
Thanks dest. I would need some time to digest the info you shared and then get back. Thanks for the suggestions.
The straddle went off at 8.15 mid on Friday. I'll cover tomorrow but am away from my desk through Wed. Trade7? Going to have the fix the trade #s. I should have covered Friday, but didn't get back until after the close.