Trading butterflies

Discussion in 'Options' started by Mnewton, Jun 23, 2018.

  1. Mnewton


    Looking at doing some butterflies this week. Anyone have experience with trading different types
    ( Calls or puts) . How long to hold. Best timeframe short (weeks) or long (months) picking the point to close out etc. Looking at doing some on GE using TOS.
    • Depends on your view of GE.
    • How do you think it will move while your trade is open?
    • Perhaps there are better option strategies than the butterfly.
  2. spindr0


    Choice of expiration depends on if doing long or short Butterflies (rate of time decay).

    Do 3 legged Butterflies (all puts or all calls) to avoid add'l frictional costs.

    Put and call Butterflies with same strikes and expiration are synthetically equivalent (similar P&L).

    Close out point based on outlook for the underlying as well as amount of P&L at that later date. For example, it's silly to stay in a position with weeks to run for 10% of the final profit. Book em Dano.

    Paper trade before plunking down the cash. Get a feel for how they behave as well as what suits your comfort zone.
  3. TheBigShort


    There are much more experienced people than myself on this board when it comes to butterflies however, trading butterflies on a $12 low volatility stock just does not makes sense to me. TSLA vol looks pretty expensive. Some bank stocks also have pretty expensive vol right now.
    .sigma and ET180 like this.
  4. padutrader


    i thought you were talking about butterflies in stomach:D