Double Butterfly

Discussion in 'Options' started by OptionSeeker, May 31, 2009.

  1. Is this trade too impractical to implement, with regards to commissions and slippage? I'm talking about a placing a butterfly on each side of the underlying price. How should this 8-legged beast be put on? Maybe as 2 ICs (first is a reverse IC and then the second further OTM IC)? Thanks.
  2. I would use natural butterflies as the body strikes are OTM, making the iron fly a little wider on fills. ATM flies are neutral to long gamma as well.
  3. Huh, that might work just as well for some of my trading ideas. I was thinking I wanted more protection and potential profit if the underlying moves while still profitting if the underlying doesn't move (I'm not holding till expiration), but maybe just changing the outer strikes of the ATM butterfly and widening the tent would achieve a similar goal. It certainly would be easier to implement than a double butterfly! Something to look into - Thanks atticus.
  4. atticus,

    I may have misunderstood what you said. Were you saying to purchase the the double butterflies as just two long butterflies (not iron flies) on each side, or were you saying just to have one butterfly for the whole position with the body ATM?

    First I thought it was the latter, which I responded to as an interesting alternative to my plan.

  5. ATM call and put:

    XYZ at 100
    Long 100/110/120 call fly
    Long 80/90/100 put fly
  6. ok, thanks for the clarification.

    I like the two flies more, but the single pregnant butterfly is worth considering if the two flies will be difficult to execute.
  7. Unless you have rock bottom commish and are dealing with very liquid equities/indicies it is so costly ...putting on a trade like that will garner you very little reward. OTOH if you build your trade...start by a simple buy of a put/call or spread and if the market goes your way then complete the fly and start a fly the other way.
  8. Yeah the cost of initiating the double flys is relatively expensive. I was looking at a particular strategy using it that potentially yielded small profits over a very wide range, but it may turn out that most of the profit ends up in the hands of the broker and MM. I've also been looking at other option positions to accomodate some of my ideas. Thanks.