put vs call in flies?

Discussion in 'Options' started by newguy05, Sep 4, 2010.

  1. for the same butterfly, long or short. What is the difference using put vs call? is there some standard rule that suggest when to use put vs call?

    for example nflx 130/140/150 long flies put vs call comparison below, put seem to have less potential profit and more loss.


    nflx sept 130/140/150

    using CALL
    97.50 ($3,150.00)
    114.77 ($3,150.00)
    130.00 ($3,150.00)
    132.95 ($195.00)
    133.15 $0.00
    140.00 $6,850.00
    146.85 $0.00
    150.00 ($3,150.00)
    151.14 ($3,150.00)
    169.32 ($3,150.00)
    187.50 ($3,150.00)

    using PUT
    97.50 ($3,740.00)
    114.77 ($3,740.00)
    130.00 ($3,740.00)
    132.95 ($785.00)
    133.74 $0.00
    140.00 $6,260.00
    146.26 $0.00
    150.00 ($3,740.00)
    151.14 ($3,740.00)
    169.32 ($3,740.00)
    187.50 ($3,740.00)
  2. rew


    Put butterflies and call butterflies at the same strike prices are synthetically equivalent. But as you have seen when you look at the actual prices there can be significant differences that make one preferable to the other. Also, with American options traders usually prefer to be short the OTM options, to minimize the odds of being hassled with assignment. With NFLX at 138 that gives the call butterfly the edge on both pricing and assignment risk.
  3. MTE


    The two are synthetic equivalents so it's doesn't matter which one you use. The difference comes from the slightly wider bid/ask spreads in the puts. Therefore, the basic rule is to use the one that gives you a better fill. Also, if you are not trading an ATM fly then you generally want to use the OTM one as the OTM options have a narrower bid/ask spread.
  4. thank you
  5. Yeah, the closer to atm the fly is, the better the fill. Deep itm on the backspread-legs will trade at a wider market.