So who's still beating it with butterflies/condors?

Discussion in 'Options' started by agev, Jan 8, 2008.

  1. agev


    Whiplash underlyings and thunderous implied vol changes require constant hedging. Really squashes the tranquility of the fly since the juice tank hasn't been stable enough to absorb from and you're ultimately forced to pick sides during the flip or reconfigure your settings.

    Oh, the irony. You originally collected the birds because you didn't want to pick sides in the first place. Bull party? Bear gang? Forget their acts of the land creatures - you were busy frolicking in the sky. Accepting neutrality was rewarding.

    You only had to stay within the play land and let the wings protect you. Well, now the wings are indeed protecting you, but wait, it's not really a good thing because it means you've been relocated from your fun land. Oh, it means you also have to pay rent now, so move on.

    New day, new play. Vanished are the global dead-vol market index months where you could lay comfortably and watch others chase and battle each other. Now you might actually have to join them because the storms can come by and flatten your domes or pyramids in a heartbeat and leave them in historic land.

    So you're not dancing on a street anymore but playing frogger on a highway. Do you really still want to play this tight balancing act? Conditional market shifts are inevitable and the vol-boys have cranked up a few notches of intensity to challenge your flight. Perhaps best to put on something and take off immediatey to just capture short-term crushings, but you definitely don't want to stay around for the swings. Maybe everyone should just pay the high fare and ride the gamma-fueled rocket bus for the imminent periods because the juice isn't worth taking anymore.
  2. why aren't you shorting some flies then? sounds like you could make a killing!
  3. empee


    so the juice isn't worth the squeeze?
  4. segv


    Butterflies are still working over here, profitable the last 4 months in a row. Without a lengthy narrative too. Do your homework next time.
  5. MTE


    Iron condors working over here as well, profitable the last 3 months in a row. This month doesn't look too good, but there's still time.
  6. GOOG Jan 600/650/700 at $23.80. Good for 8-10 in a week.
  7. I agree with the above posters...just about the ONLY thing that has worked for me in this high volatility environment has been B-fly's...even if they don't hit pay dirt...seems easier to adjust for at least modest profitability. Doing a couple of IC's but getting a bit seasick with the crazy market.
  8. bellamy


    My experience is similar.I have had consistant success with Iron Flys at 35-45 days out,then making adjustments as dictated by the market.Have been adding ICs or more Flys to initial position.It has been difficult but doable if you are cautious and stay awake.
  9. Jaques


    The market is constantly changing.Apparently,the period is switching from write to buy due to rising volatility.

    For sure,it will turn back one day,
  10. agev


    The ego of Eliteboard members never shrinks. Everyone wastes no time in pronouncing their exaggerated abilities at any opportunity. :p

    Let's be real. You're making pocket change, if any. if you're still using flies/condors.

    Sure, butterflies can still be okay if you're trading some instrument that has been sleeping under a rock and hasn't been effected much by the global volatility, but those things probably aren't that useful because you're probably collecting pocket change.

    And if you're trading stuff that's correlated to all the volatility, then you're probably experiencing quick erosion of theta from all the hedging costs. Or, if you're one who doesn't hedge at all, you're probably riding a roller-coaster in your P&L.

    There are really two kinds of traders who seek profit from premium of the flies, and here are some scenarios:

    A.) The butterfly position trader. You're either confident, lazy, or stubborn... it doesn't matter because you behave the same - you basically put it on and just hope that everything works out by expiration regardless of what happens in between. If the market has beaten your fly up brutally for the first three weeks and then rallies on the last two days of expo to bring you back to profit, would you consider you great trader who knew what you were doing all along? If you're an Elitetrader, of course.

    But something suggests you never really had a strong opinion of the directions of the markets, so you're full of it. If you did, you wouldn't had the fly on in the first place. You took a neutral stance, and that's why you put on the fly on the first place! You didn't want to pick sides. But you only chose to pick sides when the market remarkably worked against you once your fly got beaten up and you were stubborn to repair it.

    B.) Then there's the disciplined of juicer who hedges often to does not let things get out of proportion. These are "day trading" fliers. Okay, you hedge at every set points whenever the underlying moves. It was easier before because you only had to manage a turtle, but now you're occasionally forced to deal with a rabbit on crack. Up 5. Down 8. Up 3. Down 10. Up 7. Down 30. You sure you're drinking enough juice to cover that violent sprint marathon and frequent hedging costs?

    Think about it.
    #10     Jan 9, 2008