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Regular Put Butterflys for ONE

1 reply, 2 voices Last updated by Stephen Hammit 11 months, 4 weeks ago
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    • #16497

      Stephen Hammit
      Participant
      @slhammit@gmail.com
      Points: 1 083
      Going to The Trading Triangle LIVE 2016APM2 LIVE Attendee30 Day Affirmation ChallengeCongratulations Hawaii Challenge Goal Accomplished!Trade Journals
      Rank: Sophomore

      James-

      One workaround is to execute and live trade Put BFs but input the trade manually into ONE as an Iron BF.  They are synthetically the same thing.  This should solve the margin issue.  You can then manage the trade using the Greeks as per updated guidelines for ONE.

      Synthetic equivalents meaning they are all the same Risk and Reward and thus effectively no different >>

      A Call BF, Put BF and Iron BF with same widths and strikes…whether they are credit or debits is of no concern except to some brokers who do not understand this concept or have blanket margin rules.

       

      Trade Well-

      Stephen

    • #16495

      James Clements
      Participant
      @jkclements44@gmail.com
      Points: 97
      Rank: Newbie

      John’s recent Bearish Butterfly rule changes for trading the Bearish Butterfly strategy with OptionNet Explorer specify the use of iron butterflys instead of regular put butterflys.  Although the net cost of an iron butterfly is approximately the same as a regular put butterfly, in my TOS IRA account the margin requirement/buying power effect is drastically different for an iron butterfly.  Although I get a credit when I buy an iron butterfly, TOS hits my account for $5000 of buying power for each butterfly.  A 1-contract butterfly, fully scaled in, eats up $15,000 of buying power, which pretty much decimates my account.  The only way I can trade the bearish butterfly in ONE is with regular put butterflys, but then I potentially have a problem with the trade guidelines regarding the delta limits and delta/theta ratio that John specified for ONE adjustments using iron butterflys.  My sense is that for small-lot trades, the practical difference for delta and theta between iron butterflys and regular put butterflys is negligible, and that I can adjust regular butterflys using John’s ONE guidelines without significant risk.  Any thoughts will be appreciated.

      Thanks!

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