Ok here is the same position with a +3.00% in vols at OCT expiration. I also highlighted the maximum simulated loss which is $1,600. Not a bad risk for a max return of over $10,000. Also a nice net credit of $3.00 as of right now ToS prices. So profit hole is if the market goes absolutely nowhere until expiration. Even then I think the max profit is slightly less then forecasted here based on review of live option chains but it is still relatively low. Once I get the hair cut figured out then we really will be cooking!
Forgot to mention: skew displacement for different expirations can be done independently. Given there is only one strike in this position, surely the skew displacement functionality is sufficient?
This butterfly looks like a nice complement to the creditspreads. If the markets go nowhere, the butterfly has a manageable loss but the creditspreads payoff.
That is what is attracting me. Potential for large rewards with little manageable risk. I am also looking at what I can do to lift up that loss curve. An ATM NOV/OCT calendar actually lifts the bump a little but changes the graph a bit. I will post that soon.
The prob with that might be the path dependence. If your barrier gets hit pretty quick, the fly will be nowhere near its peak to compensate you. Unless of course, the barrier is the hedge and the FLY is the prime. hmmmm Admittedly, the fly does offer a nice r/r so it could be a nice bet if one can leg into it nicely and cut some of the lost edge.
Hi, Gang: I use Options Xpress. I have started utilizing the Options Pricer and am puzzled by the fact that the Theoretical Price is not always the same as the b/a. Sometimes not even close. Can anyone shed some light on this for me, please? Bob
optionsxpress does not plug in the accurate IV so the theoretical values are always off a bit. Also the ITM and OTM options have different IVs and OX applies one value across all strikes so you get skew errors. Just use the pricer to test changes in the price (testing changes in IV or time) but do not pay much attention to the initial theoretical values..