Just want to stress that the only difference between a 132/231 fly and a 2211 condor is one strike. IOW a 100/300/400 132 fly is nearly fungible to the 100/300 x 305/400 1122 condor. The difference would be the greeks (and terminal PNL) in the 300/305 vertical. The shared body strike makes it a fly (vs. condor) but it's semantics. IOW, a 132 fly is really an asym-condor. It's best-practice to trade OTM so the condor is the default position when discussing asyms.
I’m aware that wings can be symmetrical or asym... but you replied “asymmetric” to the moth picture.. don’t get it, the wings on the attacus look symmetrical to me?
If you look at the wings in the pic... they do look slightly different (pattern on wing and size near gekko mouth (ones more pointy))
regarding structure.. OTM CALL 121’s for a bullish pin OTM PUT 121’s for a bearish pin but when it comes to broken wings... you use the calls for a bearish bias, and the put fly for a bullish bias, correct? but with 231/132 it’s different. Disregarding skew, stickiness, and higher order mechanisms for a second. Just pure delta bucketing, you place the body strike for a touch @ time, and use the asymmetrical wings for hedging where you believe to be the most risk. Thus, if you use a 231, you believe the directional risk to be the upside, but ultimately are betting spot drifts lower to the body. 132c your risk is to the downside, but betting spot will drift up to your body. Is this why the bull vertical is twice the length of the bear? The bull vertical is the risk and reward of the overall spread? Or are other mechanics at work like intrinsic value and implied vol? I’m just trying to get a basic feel for body placements in regards to asym’s, in a vanilla form factor, not including the higher order Greeks or kurtosis. Just where would be a overall approach for placing 231p and 132c in regards to body vs spot
They are equivalent, but assuming (due to your OTM example) that body strikes are OTM. You're 2:1 on width as the terminal PNL is symmetric. IOW the risk at either wing, at exp, is the debit (or strike diff - credit if short). The debit risk will not equal the debit paid if you alter strike width or increase leverage. IOW, a $30 100/300/400 132C risks $30 terminally at either wing, ignoring payoffs inside the wings prior to exp. A $10 debit on a 100/300/400 153C fly risk is not symmetric and the debit paid is meaningless. Essentially it's a leverage constraint. Sure, you can buy the 153 fly as a bearish wager, but that's not the point. The debit paid on the 132, assuming 2:1 strike diff, is the terminal risk. The debit paid on the 153 isn't the terminal risk at the distant wing. Time is synthetic vol; vol is synthetic time. There is a point in time and vol where the payoffs diverge; you won't likely want an immediate body touch with a asym-fly as the neutrality figure will typically lie within the first two legs of the natural. 100/300/400 asym. Neutrality is some figure <300. In a 132 bull fly... what happens to vol as the market rallies (index position)? All wings accrete in terms of vol as artifact of skew and ignoring strips, but where is your leverage? The leverage is in the body strike. It's a balancing act between time (synvol); skew and strips. If you just want an upside strike touch then buy bull index calendars (LVLD) or verts. The gains from delta and skew (stickiness) should overwhelm loss to strips.
Ideally you're not going to be a buyer of bull 132s unless it's a proxy for spot or vols are stupid high. Now, I do it all the time but there are better structures. They are fine as a delta play, just don't trade them neutral (at inception). Does it matter if you're neutral to 14500 NDX in a 132 or 121? The 132 will drift and the 121 is linear, but concern yourself with what you have... not what you should have traded.