Labib, I have't done a lot of them but I have tried both ways. at the close of today the mid was $3.60. Sometimes you can get lucky and actually get filled at mid...usually I offer $.10 to .20 over mid if I really want the spread. However you need good liquidity at the strikes you want and hopefully a day of solid volume to get filled.
fancy name "broken wing butterfly" for a butterfly with one wing "shorter" or longer. In ugly's case the spread is 20pts and 10 points rather than the 10, 10 or 20 , 20. Unbalanced flys are flys that have a different number of contracts on the wings. In TOS you can actually put in an order for say a 3, 5, 2 or 2, 5, 3 or any kind of combo of fly you want. Pretty slick but I still like to build them. If I'm not mistaken a BWB is also a pregnant fly? so you can do a BWB, unbalanced fly like... +30 1445 -50 1450 +20 1465...crazy but I have just that on for Feb I've been debating whether I wanted to buy 5 more points on the near side or shorten the rear end to take out some of the risk. Its simply a combination of debit and credit spreads with the "body" of the fly at the same strike.
Interesting!. would you mind sharing your position info (+30 1445 -50 1450 +20 1465).how did you start building it(first leg or spread).how much credit you received or debit paid. appreciate it.thanks
Good to hear RR. I traded into the position with +1x1455Cs at 10.1, -6x1475Cs at 4.3 and +5 1485 Cs at 2.40. It pretty much looks like a vertical with a little bump on the right side. I know you don't go for the pictures, but I'll see if I can put up a risk graph later. BTW, snow at Whistler was EPIC - no airport closures tho' ! Ugly
probability of that based on gaussian distro is ~9%. If vols decline 1.5%, probability is 5%. Also, as time erodes, probability declines and the position develops some positive curvature between 1455 and 1475....I think. Like I said, it looks a lot like a vertical, except I am not so afraid of alast minute rush to the short strike. Ugly
OK so the BWB is both pregnant and unbalanced +1(20pt spread)-6 :eek: + 5 ( 10 pt spread)...nice! a bit like most women who are pg no offence of course...
Sure. On Dec 4th I started with the 1445/1450 debit spread for $1.80. The 1440 was not available. Filled abt 10:25am. If you look back at the chart you'll see it was a very strong up day so about a half hour later I then put in an order for the 1450/1465 credit spread and filled for $4.40. Again the 1460 was not available (which would have been my first choice). My order was the only contracts filled that day at the 1460 and most of the contracts at the 1445 level (total that day was 35). total credit received was $3400. When I finished the order I priced the mid of that fly and it was a credit of $2.7, however at the end of the day it was what I had paid or $3.5. Today I am basically at BE (mid is about $4400 to close) it varies each day. At the time there wasn't that much activity so I put together the best I could. If we have another strong down day I will roll my 20 1465's down to 1460's or possibly the(30) 1445 down to 1440's...assuming I can get a fill. My thinking then (and now) was that the 1450 level will be a good "hedge" place in Feb. I was going to wait to sell my OTM credit spread but did jump the gun a little once I put that hedge in place and sold a 1475/1500 Feb call CS for $5.15 on Dec 18th which has done well. I plan to close that and possibly open another later depending on mkt conditions. To add a little to my thinking...These are for me more "hedges" than profit positions. I'm going to try and eventually have a fly with no risk or cost which will have profit potential but the real purpose is to give me a focal point beyond which I can open and close several FOTM credit spreads.
RR, great explaination of your vision. It is definitely a cut above the buy and hope stategy that most people have. What is your experience wrt the possibility and profitability of this type of approach in the current market? Ugly