The 'correct' name for this is ???

Discussion in 'Options' started by asdfghj7, Aug 28, 2009.

  1. If XYZ is at 50, and a call ratio spread and put ratio spread are
    created using the same month expiring option contracts, what is this combination called? Is there a name for when ratio spreads are combined in this fashion, or is it simply two basic trades? An example is below. Thanks Guys

    XYZ at 50
    Trader buys one Dec 2009 ATM 50 call and sells two Dec 2009 55 calls. The trader then buys one Dec 2009 ATM 50 put, and sells two Dec 2009 45 puts.
     
  2. dawgolfer

    dawgolfer

    I could be wrong...but it sound like an Iron Condor...
     
  3. long or short a wrangle - I can't remember which :)
     
  4. Wait, long wrangle is a double ratio backspread, and your position is a double ratio (front)spread - so maybe a reverse wrangle? I don't know.
     
  5. dr_sean

    dr_sean

    no name for that that i know of sometimes when you trade the opposite of the butterlfy (2x1x2 instead of 1x2x1) some call it the "dragonfly"

    Just one thing I'd say is your example is just the Dec 50 straddle vs the 45/55 strangle twice. That in itself will hint that you're trading an iron condor w/ a strangle.

    Plenty of different ways to look at any strategy like this that's just the way I look at it.
     
  6. Good insight. I'm seeing it much more differently now. Thanks Doc
     
  7. I would call that an iron butterfly with two strangles.
     
  8. It breaks down into a variety of positions so you can call call it A or you can call it J.
    It's not how big it is, it's how you use it.
     
  9. dr_sean

    dr_sean

    Best advice I can give is always to think about the net options count and the vega associated in any strategy. E.G. a lot of people look at a call spread / put spread as tougher to do w/ margins & crappy brokers / bad commish & whatnot but really a 5 buck put spread is just rolling up or down and has no vega to it. You can get a tighter market for a ps/cs than a naked option. A straddle on the other hand is 2 options so twice the vega. Just keep thinking of it in terms of how much greeks each position carries.