By way of background, Atticus has posted two very educational journals where he trades butterflies: "atticus' single-name delta book" http://www.elitetrader.com/vb/showt...=6&pagenumber=1 "atticus' 'ship it' vol trading journal" http://www.elitetrader.com/vb/showt...trading+journal I learned more from these than anything else on ET to date.
Not so if it is part of a long series of such trades as long as the overall statistics work out in your favor. Having some losing trades is inevitable and if you try desperately to rescue them you may just be throwing good money after bad.
lol, I don't adjust flies, or any other option position. The only caveat would be some explicit gamma-trade, such as an ATM synthetic (straddle, etc). Avoid adjustments.
Thanks for your reply. I tried to access the links but they aren't working. Could you or Atticus post some working links to these articles?
Ok, these trading journals are beyond me. I want to stick to a relatively simple strategy on indices.
"atticus' single-name delta book" http://www.elitetrader.com/vb/showthread.php?s=&threadid=253092 "atticus' 'ship it' vol trading journal" http://www.elitetrader.com/vb/showthread.php?s=&threadid=248751
I doubt that any very simple strategy will be profitable (educational webinar hucksters notwithstanding). But it is certainly a great starting point for testing.
get a gen 3 cam'o, 305, tbi, blows doors off most, simple to work on, i rescued mine from idiots, 1k and 1k to correct their folly, and its the best cheapest fun i ever had. and i have had gasser ford big blocks, corvettes, gto's (still have a 68 rag), poncho 455's, beemers....
This is where understanding that "adjusting" is simply adding another trade to the mix. The addition of a fly as the underlying moves up is telling the world that you now think that the spot will terminate at that higher level in contrast to your prior view that spot would remain lower. You now have 2 positions on, even though you may not be able to "see" them both. Thus, you're adding more potential risk to your trade. If that's okay, then go for it. The responses you're receiving are simply reminding you of that stance. You might start with an ATM fly with only a small fraction of your trading account with the idea that you'll add positions as time passes. Just remember that if you're lucky, the positions will mature and you'll have the opportunity to unwind profitably at some point. Don't miss that moment. And realize that sometimes price movement will be so severe that you can't use this approach successfully. Stress test this possibility before you use your hard-earned money.
Trade around some mean-reverting process. This is actually the way most of big players trade apart from pure arbitrage. You need to do your homework to find one. I guess a good example is atticus's pitchfork - http://www.elitetrader.com/vb/showthread.php?s=&threadid=244704&perpage=6&pagenumber=1