Buying one side? Are you referring to put vs. call or body vs. wings? I am selling the body combo into the weekend and buying the wing combo at a future date not to exceed 10 calendar days. When/if the conversion takes place is dependent on some variables; decay, decay marking-down vols, strip vol increase/decrease, smile vol +/-, delta accumulation, etc. There are no predictions involved; it's a shotgun approach to see how well/poorly a generic strategy will perform. I won't be trading these large, and I certainly wouldn't expect anyone else to do so.
Trading for theta requires taking some gammas. I will stick to the front month until 2 weeks to expiration; at which point I will rolloever to the following expiration series.
Yeah, I'll take your word for it. I guess it's a matter of quantity/quality. Tip of the iceberg stuff, which makes it difficult to navigate and irritating, considering the quality of the analytics.
What I was referring to is if you sell the XYZ $45 Straddle and teh stock moves to $49 you buy the OTM Calls to add one wing of the FLY. I guess what you are saying is that you sell the $45 Straddle and a few days later simply slap on the OTM strangle to lock in a FLY? Is it in equal numbers or ratioed in any way (more wings than body? Since the FLY makes its max profit from non-movement in the theoretical sense, it appears you are looking to make money initial on the short straddle from decay and then slap on the wings at a lower price also due to that decay.
Damn B, I had already reduced my time on ET to only reading your exotics journal. Now you've just doubled my time spent, as there will now be two threads to follow. As always, looking forward to learning something new. On a more serious note, how am I gonna get you outta the office for drink now? Good Trading!
I won't be hedging with gammas, beyond the wing strike conversion. A significant loss in the body would be the result of delta and vega risk. If so, the wing strikes would be a poor addition due to peak exposures in the initial wing strikes selected. The wing strikes are a constant; in the sense that I would want to maintain symmetry on strikes. I want to trade a classic fly, no pregnant or ratio flies. If I can't earn "building expectancy" from a decline in the wing vol debit, then I will simply offset the straddle and reallocate.
"If I can't earn "building expectancy" from a decline in the wing vol debit, then I will simply offset the straddle and reallocate." Got ya. Thanks. I assume the the benefits from the wing vol debit is enhanced from a decline in the body vol credit as well.