My butterfly/calendar/straddle option trades

Discussion in 'Options' started by johnshepherd59, Jun 22, 2012.

  1. I realize that we already have plenty of threads where people post their trades, but I feel like I also need to do this to learn how to trade. These are not paper trades. I will be using real money. Any advice/comments/suggestions always welcome. So, I'll be following a few rules. I'll add as I learn more about myself.

    1. If a trade shows a loss of 20% or more, it will be closed
    2. No more than 10% of my portfolio on any trade.
    3. I will trade based on my vision of where the market is going i.e. it will be directional bets to a certain extent using mainly delta neutral strategies.
    4. No naked positions, period.
    5. No adjustments. If a trade is failing, I sell.

    So, let's start!

    I placed two trades today. I am bullish on both.

    1. SPX JUL 1300/1355/1405 butterfly for 18.20

    First and foremost, I don't use technical analysis. My directional bias will be based on my own analysis. In my opinion, virtually all negative news has been factored into the stock market, except for cataclysmic events. The only cataclysmic risk I can see will be coming from Europe, which won't be happening in the next few months. Furthermore, the spanish 10 year is trading at 6.38%, which is much better than the 7%+ just a few days ago. Having said that, I also don't see any catalyst that will cause the stock market to soar. Therefore, a 1300/1355/1405 fly seems reasonable. The S&P was trading at approximately 1330 when I placed my trade.

    2. FB Jul 30/35/40 butterfly for 1.95

    Facebook is heading back to its IPO level pretty soon. After I pulled the trigger, I felt that I would have felt more comfortable with the middle strike at 37 instead of 35 (of course the wings would have to be adjusted as well).

    Now, why did I choose the butterfly spread? Volatility will be coming down. Vix is at 18.11, and it will fall further. Furthermore, I like the fact that butterfly spreads will allow me to be wrong to a degree.

    So, just two trades for now. I'll be holding these hopefully for a week or two. I'm not going to "leg". I read somewhere that very few traders are successful at legging.
  2. please be more specific:
    are you buying CALL or PUT butterflies. And it would be nice
    if you mention the exact date and time of your trades.

    I hope for you that SPX is not going below 1321 next week
  3. These are Call butterflies. My understanding is that put/call/iron butterflies are equivalent. The only difference between iron and put/call fly is that the put/call is for debit whereas the iron is for credit.

    The Facebook trade was at 11:30:03 on 6/22/12 (yesterday). Total cost $1950
    The SPX trade was at 11:20:21 on 6/22/12. Total cost 3640
  4. I would reconsider the 20% loss rule. Options are so volatile a 20% loss can turn into a 50% gain in one day. You should change it from a percentage loss to a time frame, as in holding for x amount of days no matter what the loss/gain is. Holding till expiry I think is best.

  5. I am down >10% today on the spx, but I am going to wait till healthcare ruling before I make any decisions.
    As far as facebook, I have no plans to sell it.

    I guess calendar spread was better than butterfly for the SPX.
  6. You went long delta.
  7. Well I was bullish because the healthcare ruling was supposed to come out this week even though the vix was relatively low given all the turmoil.
    Would you have done differently? Appreciate your advice.
  8. You go long... market drops... you lose monies... you state a bull calendar would've been a better play? No, I wouldn't supplant one bullish position for another into a 2% drop. They both lost.

    You were wrong on price and volatility. Nobody gives a shit about healthcare when EU markets are plummeting. Merkel is dead-opposed to any collective EU debt offerings. The Euro is doomed and I am surprised we're not limit-down.
  9. If I bought a calendar, like you said in your previous posts (in some other thread), I would buy expecting a drop. So in other words otm put calendar or something of that nature. You said in your previous posts that calendars are better if you're expecting a drop (given that you're long vega), while butterflies are better if you're bullish.

    I was wrong today, but I will still wait for the healthcare ruling. If the healthcare ruling isn't favorable, I expect to lose more. I am down 500+ on the spx, so I rather wait to be honest.

    I actually bought 1320 jul calendar spread, but I sold it before the market drop, which I think was on Thursday. Would have been a gain if I waited. One thing I have decided to do after that experience is wait till the end of the day before making any decisions on selling.
  10. I'm not intending to be hyper-critical, but none of this makes any sense. It's like stating you should've gone short instead of going long.
    #10     Jun 25, 2012