Hi Ricky (and Vicky),
You sound a little frustrated and I don't blame you - from your perspective. Contrary to what you hear from all the folks who sell their services, options are anything but easy or intiutive. Well, at least not until you put some effort and understand it.
Michael gave you some hints on WHY dissecting into butterflies is used by experienced traders/MMs.
Let me give a quick example hoping this will put you in the right direction (if not, please delete):
Take a condor +1 90/-1 95/-1 105/+1 110.
This is nothing but three butterflies (check this out for yourself, a good exercise):
+1 90/ -2 95/+1 100
+1 95/ -2 100/+1 105
+1 100/ -2 105/+1 110
So he is dissecting the iron condor into three butterflies. BTW, in his spreadsheet/dissector, he would represent these three flies as :
95 1
100 1
105 1
The premise now, as a trader, is to see the trade differently. You may enter a condor, but at some point in the cycle, you may decide to take these one or more butterflies off of your condor to position yourself better in the trade - rather than simply waiting for the underlying to expire between your shorts.
This is just one example. A "big" butterfly can have baby flies in it, etc. etc. You get the picture.
If you are trying to figure out the algorithm, use "boxes" as a catalyst in chemistry (chemical reaction) or as additive identity (0) or multiplication identity (1).
I haven't taken any of Cottle's paid courses, but there are some free videos on his site. I do have his CWS book and parts of his OTTHR book that is publicly available. You have to put some time into it. I remember the first time I read it, I didn't know which language the book was written in!
He does remind me of some of the brilliant professors I have had, who may not have been the best teachers. So you have to make the extra effort. And as with anything, this may not be for you.
And even if he were a good teacher, he wouldn't spill all his beans for free - after all, he is making money off of his courses too ;-).
Hope this helps a little.
Murthy
On Mon, Sep 7, 2009 at 1:26 PM, Ricky Jimenez <rickyjim@bestweb.net > wrote:
On Mon, 7 Sep 2009 12:31:50 -0500, "mcatolico"I am trying to get some sort of handle on what dissection is all
<mcatolico@mindspring.com > wrote:
>>
>Just what is the most general statement that can be made about
>decomposing an arbitrary options position into flies? I knew that
>condors can be broken up that way.
>
>
>MC - not sure what you are looking for.
about. Can an arbitrary options position (all expirations the same)
be written in some neat sort of way as the combination of simple basic
options positions? Of course it can in terms of individual calls and
puts. But I am told that there are useful ways to write it in terms
of not as atomic stuff, for example butterflies and boxes. OK, what
is an algorithm for making such a dissection (decomposition?)? Since
software is being sold to do such dissections, it has to follow some
sort of procedure.
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