Far as I can see, a long butterfly is looking to capitalize on two things. 1)The contraction of the premium and 2)some time decay, over two days? Then you buy it back cheaper? That is eight commissions and whatever bid ask spread. That is a lot of expenses to overcome. The horizontal time, calendar seems better? The disadvantage, being with the butterfly, you have two sets of options SOLD working for you, vs only one set of options in the other.
In TOS (and most other brokers) you can put a trade on as a single order. I'm bullish on XYZ trading at 20. I put on a directional fly in one click by buying a XYZ butterfly (1 25 call..sell 2 30 calls buy 1 35 call). you can use puts if you are bearish. by "building" I simply mean I might start with 1 25 call. stock moves to 23 so I sell a 30 call. Then it moves up to 28 and I sell one 30/35 call vertical. another way to build is buy a put (or call)then when it moves in my direction I can sell the backspread and perhaps get the fly for free. I do a lot of these. The safest way of course is to buy the 25/30 vertical rather than leg into it.... then sell the 30/35 vertical when you have a bit of a profit. Trading flys for volatility is harder so I think first you need to focus on directional flys. Calendars can evolve into flys. flys can evolve into condors. The limit is your imagination and pocket book.
your absolutely right about commissions..sucks. However commissions on calendars arn't much better if you are rolling your short strike M 2 M. That is why as I said most people prefer long/short puts only. The reason to build a vertical or fly is just a way to "lock" in your gains.....but of course by selling the call or put you bought you have locked in your gain. Commission is less of an issue when you are buying flys on the SPX NDX..AAPL/GOOG since we are talking thousands of dollars of gain or loss. In a small account honestly they make no sense (to me)
Good question. He lost his "mojo" with the AAPL trades, first trying to call the top then revenge trading. I think once he focuses on the earnings trades he will soon reach his goal of $20,000.
Been reading trying to find an explanation of the long buttefly. It seems to be the lower is a credit spread and the higher is a debit spread. Can you confirm this for me please? Two sold options are ATM.
Buy 1 of SPY April 140 calls filled at 2.00, sell at 2.60 (+30%) or if tanks before rising then Buy 2 of SPY April 140 calls at 1.50, sell all at 2.10 Stop: 1.20
I´m waiting for a bottom in QQQ. With your order for SPY I wondered if you had an early signal or something? On checking I didn´t see anything yet, more than a range bound type undecided market? I´m not really expecting a turnaround before tomorrow, or Wednesday? Could happen of course. I do see the quick move both in QQQ and SPY. Not enough in QQQ to make any money though. So I am just watching.
Falcon, My Signals are based on mathematical formula's and I do have a call signal for today. "But" even looking at a simple candlestick chart (see attached chart of SPX): 1: The SPX is in an uptrend (higher highs and higher lows). It then pulled backed for 3 days (March 27, 28, & 29). 2: The last day of the pullback (03-29) formed a hammer candle which is a bullish changing of the guard after a pullback in an uptrend. 3: The day after the hammer candle on March 30 it needed to trade above the high of the March 29 hammer candle to trigger another 3-5 day rally, which it did. 4: Now watch for the SPX to break new highs in the next 3-5 days. "There falcon, I just gave you "the heart" of a $3,500 Pristine School I went to in the 1990's." Jeff
Hold the bus now. I've got one lucky call working on VVUS as I type. Does that make me as elite a trader as FF? And if the trade doesn't work, I will just say I had VVUS on my watch list that I never entered a trade. As long as VVUS stays below $27 by April expiry, it is a trade. If not it is on my watch list. Or perhaps it will be a bull spread rather than a bear spread.
Jeff I kind of thought of averaging down, in bottom fishing, accumulation so to speak. Even of doubling up each time. But I finally decided to wait for a breakout and then just pile it on. In the QQQ I am not expecting a rise of more than .30 to .50 cents for this week. That would only be 12% to 20% gross return. Maybe the SPY returns more than the QQQ? That would be interesting to know, for rougly the same move. They tend to parallel.