Sunday, June 14, 2009

Re: [TheOptionClub.com] youtube?



Since the risk reward is the same, what I normaly do is go to TOS analyzer tab and I put 3 of them at the same time and I choose the cheapest one sometimes there is a few pennies difference. As for the time period, I like to mix them up, for instance if put one for the front month I go with shorter wings for instance If use the SPY and I put one for July
I will use 5 points spreads. Today if I buy the July 90 95 100 call butterfly my risk will be 146 and my reward 354, I have room for adjustment when one of my wings gets hits. If I'm going for longer time period say August I like to use the short Iron Butterfly with 10 points spread for Instance I will sell the AUG 95 stradle (the body) and buy the 105 85 strangle (the wings) I will get 631 credit and risk 369. if the spy goes up or down to my break even point I will adust By buying another one. for instance if the spy hits 101 before Aug expiration I will buy another Butterfly, or vertical , and roll my my 85 puts up for cheap, in case of reversal. I will roll to 88 or 90 for a little cost.
In case of High volatility, butterflies become cheap and I'm able to have wider spreads for the same cost  and increase my break even points.
I also use the ITM butterfly for protection, For Instance I bought a few 80 delta leaps on USO a few months ago and I keep rolling them up to lock profits and buy ITM butterflies below the current price. for instance if I buy the  the 33 37 41 July call butterfly for 1.10(ITM butterflies are cheap) and the stock goes down a few dollars i will make some money to cover some of the loss on these leaps but I will leave the upside profit open( unlimited). I could sell ATM or OTM calls but on oil stocks it is risky. In case of any war or turmoil in the Middle East oil stocks might jump $10 or more overnight.
 
Labib

--- On Sun, 6/14/09, Rob Hansen <robhansen5252@hotmail.com> wrote:

From: Rob Hansen <robhansen5252@hotmail.com>
Subject: Re: [TheOptionClub.com] youtube?
To: OptionClub@yahoogroups.com
Date: Sunday, June 14, 2009, 3:15 PM

Labib, at what point in the cycle do you put your butterflies on? Perhaps between 30 and 40 days to expiration? Also, do you prefer to do call butterflies or iron butterflies? If you do both, what is your determining factor in choosing one over the other? Lastly, would you only put on a butterfly in a high volatility environment with the expectation of vol going lower, or is your directional determination of volatility not a factor?

Thanks for the very good posting.

RFH

--- In OptionClub@yahoogro ups.com, "labib" <ldvn@...> wrote:
>
> --- In OptionClub@yahoogro ups.com, a a <Praesto12@> wrote:
> >
> > Do you guys have videos on Youtube??
> >
> > --- On Thu, 6/4/09, paul7313 <paul7313@> wrote:
> >
> > From: paul7313 <paul7313@>
> > Subject: [TheOptionClub. com] how do I analize butterfloies?
> > To: OptionClub@yahoogro ups.com
> > Date: Thursday, June 4, 2009, 4:01 PM
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
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> >
> > butterfly; sell 2 qqqq calls at 37
> >
> > buy 1 qqqq call at 47
> >
> > buy 1 qqqq call at 27
> >
> >
> >
> > what happens if the market goes up, stays the same, goes down?
> >
> >
> >
> > I think butterflies are better than straddles
>
> >
> Selling ATM front month staddles gives you the highest yeilding strategy out there, but it is not recommended and dangerous. You are short two naked options and any one of them could wipe out your account.
> Butterflies on the other hand are hedged staddle. They come in all shapes and sizes, however we are concerned with 3 types of premium collection butterflies:
> 1- long call butterfly Buying 1 ITM call selling 2 ATM calls and buying 1 OTM call
> 2- long put butterfly Buying 1 ITM put selling 2 Atm Puts and buying 1 OTM put
> 3- short Iron butterfly selling 1 ATM call and Selling 1 ATM put (straddle) and buying 1 OTM call and 1 OTM put (strangle)
> All options are in the same Month. The long ones you pay premium and the short Iron Butterfly you collect credit, but
> All 3 have the same risk reward. and almost identical
>
> In your Example which is the Long call butterfly on the QQQQ +27 call
> -2 37calls and +47 call it is way too wide for the QQQQ. For instance as of this writting 6/5/09 after the close This butterfly for July expiration will cost you 7.32 and your maximum gain will be 2.68 way too much unnecessary risk. your break even points are 34.32( add the cost of the buutterfly to your ITM call 27) and 39.62 (deduct the cost of the butterfly 7.32 from Your OTM call 47).
> Instead you could do the July 32 37 42 for a cost of 2.58 and maximum reward of 2.48 almost 1/1 risk reward. and your break even points will be 34.58 and 39.38.
>
> However watch for Volatility, If volatility increses the price of the butterfly will drop, on the otherhand if volatility decreases The price will go higher. Butterflies are very slow moving vehicles and you get plenty of time to adjust them if they move beyond your breakeven points, except when we get very close to expiration.
> Personally I like to do them on ETF's and Indeces. SPY, DIA, XEO.
>
> Labib Imtanes
>

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