I don't understand this thread. When the NDX was going up everyday, at 10am to 2pm you could buy verticals that paid off 8x to 20x for moves as small as 0.5% to 0.75% on the down side by EOD. There's plenty of opportunities for great risk reward ratios in options, thats one of the obvious great advantages for speculators, what am I missing?
Your missing the OP's complete and utter lack of understanding of option basics..Read his earlier threads...He enjoys making absurd posts
Here I fixed that for ya...changed to puts and lined it up with the sweet spot. Hey why can't the platform overlay our option strategies on the chart...that would be cool.
We were discussing symmetric strike fly-debits being a fraction of the vertical. Verts are unmodal to delta while flies are bimodal. Hence, if you want a fly structure that guarantees a gain in one tail, then trade a BWB. It's still bimodal delta, but you can structure a bull asym/BWB with a right tail above x.
Yes I am more bearish short term IF I was trading I would go with the BWB structured with the left tail above x ? I'm starting to understand the setup....basically you want to bleed off extrinsic value on the short option, at a cost of losing extrinsic value on the itm option. The otm option is purely for protection.
Beginner's modeling of index skew: You can model both ATM call and put flies on index, struck to the forward. This will give you a call value > put value. cfly/ply >1. Single P/C risk reversals (neutral) are put revenue side. VERTICAL SPREAD (ps, cs, fly, etc.) risk reversals are call spread revenue side (right tail skew < ATM). Oversimplified but these are normed w/o relying on an annualized vol-fig. Useful for excel modeling. More intuitive and normalized.
I sometimes suspect that wxy is not as clueless as he appears, and creates these threads solely to elicit this kind of useful advice.