The basic idea was to own an "explosion position" in the back month and sell time premium in the front month. He does not describe exactly what the explosion position so it could have been a straddle, strangle, or short fly which are all nondirectional. In the front month he says he would scalp premium which he probably means that if an order came in to buy calls, he would quote a little above fair value and sell he would quote a little below fair value. Or he would buy an ATM fly which captures time premium if the underlying does not move much. If it did move a lot he would lose on the front month but make a fortune on the back month position.
From: asdfffg1 <joshuas7@hotmail.
To: OptionClub@yahoogro
Sent: Sat, November 28, 2009 1:24:39 PM
Subject: [TheOptionClub.
In 'Market Wizard's', Tony Saliba describes a fly strategy, where he bought backmonth flys and would short frontmonth flys to scalp. Does anyone know if the front month fly sold is placed ATM ITM or OTM. If someone is familar with the details, I would very much appreciate some kind of visual, for this setup. Thanks for the help
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