Well yes, that does make sense to me what you are saying. However, in my case, I only ever place trades that are deep ITM to test the market. I place the lowest limit order possible, 0.01 or 0.05. Then if it fills, as has happened in a few cases, I try to work the exit limit order. So far, I have never been able to exit a butterfly trades this deep in the money. I get it, liquidity is hugely important, especially with options trading because so many underlyings and strikes are indeed illiquid. Also, the gain I posted earlier, was fluctuating based upon the mid price, which is currently -0.05 as the market is closed. I will continue to review future trades. I assumed that a fill at mid price on entry would lead to a more favourable exit price. However so far that has most definitely proved to not be the case.
Trade two debits (one to open and one for the synthetic)? Just let it go off and self-immolate. Hit me up, get. I am going to invite you to our chat.
You're never going to learn but it's inferior. You're seeing the DITM spread trading negative and equating that to a marketable value when it's noise. I get it that you buy the DITM spread cheaper than the OTM spread and equating that to value, but it's cheap because there is no interest in it. You're never going to be able to exit unless the index trades to your strikes (as in your diagonal win).
I assume you are a retail. Why are you trading flies may I ask? As an amateur retail, I have finally throwing in the towel on trading flies and stay with single legs directional bets. There are just too many legs with multiple commissions and bid/ask slippages eating up most if not all of my theoretical edge.
He's trying to arb a fly at little to no cost but his is not able to exit bc the indications he sees are not actually marketable.
I am a retail trader. I trade butterflies because they can be cheap to open, and there are no extra margin requirements. Also the risk reward can be pretty damn good. The commissions are heavy yes, but if one is able to exit a trade with decent profit, that doesn't matter so much. Hence my frustration that I cannot seem to close my profitable trades.
NDX is EXTREMELY illiquid especially if you trade after 4 PM. The bid/ask spread is wide and the fill is terrible. You usually have to wait for a very long time to get filled even though the price is at mid-price. I traded it few times and had to stop because of this even though it's extremely profitable at times. At the end trading NDX was just not worth it. All those profits all ended up to be just paper profit cuz when it's time for you to realize that profit, the fills are just terrible or you don't get filled at all. SPX is a lot better. I dunno if you are exiting the butterfly leg by leg or by combo. If it's a combo trade, then that's even worse because there are so many legs in the fly combo and the trading of combo trades is handled in a specialized market so I have heard and the liquidity in that market is even thinner because the demand for multi-leg combo's is less.
You should just trade verticals. Not a lot of legs thus lower commissions and much easier to open and close and the hedging is still there.