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To iron or not to iron

1 reply, 2 voices Last updated by John Locke 6 months, 2 weeks ago
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    • #16866

      John Locke
      Keymaster
      @john-locke
      Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

      Hi John,

      I’ll answer this in 3 parts.

      We are using standard put BWB’s for the V14 and V17 as well as for the RUT strategies that are entered in BWB configuration (M3.4u, v32). This is because these strategies are both less sensitive to analytical software and they were developed on the ONE software.

      The butterfly only and especially the butterfly/call structures on the other hand are much more sensitive to analytical software. In fact when testing M3, BB, and ROCK strategies, I found it nearly impossible to create a usable set of guidelines in the ONE software due to the put/call skew variations. I found that by using Iron butterflies, this “mostly” resolved these challenges, or at least brought them to an acceptable level.

      Now. regarding the V22 specifically, I was torn on this one. V22 was developed/tested in ONE as a put butterfly and at the time of testing I found that the put call skew issues with the SPX were reasonable enough to use the put butterflies. However, being aware that put/call skews in the future may become a problem, I decided to switch to the iron butterflies on the Options Trading For Income Monday morning webinars because we are monitoring with ONE. In OV, it doesn’t matter if you are doing put, iron or call, all the Greeks are identical on that platform. That said, I have mixed feels about trading them as irons on OTFI. I have not done extensive testing on V22 specifically with iron butterflies. I based the decision on evidence about how the RUT M3 behaves in ONE only. The results of this decision are still under evaluation. At some point I plan to go back over the last year and trade the put version for comparison. So in short “I” decided to shift to the irons however I have no evidence that trading the strategy as puts will present a problem. Therefore, I’d be OK with a student trading the strategy either way (puts or iron) at this time but I would expect different adjustment points and sometimes different results.

       

       

       

       

    • #16781

      John Wilson
      Participant
      @john4wilson@gmail.com
      Points: 977
      Blog WriterGoing to The Trading Triangle LIVE 201630 Day Affirmation ChallengeAPM2 LIVE AttendeeUltimate Income Trader Workshop
      Rank: Freshman

      John Travolta,

      I had to throw in a dance reference. 🙂  Regarding ONE, would you recommend that the X4 series trades be traded as iron flys or normal put flys as laid out in the program?  I ask as I see you are doing irons for M3 (RUT), Rock (RUT) trades, etc.

      Thanks, JW

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