Friday, January 15, 2010

01/15 NDX Directional Butterfly

We had another down signal based on the 5-day volatility chart, so here I go again with a directional NDX butterfly. One thing I will have to do is re-test this position with a wider wingspan.

The reason behind testing a wider butterfly is that by having a short wingspan I allocate less money, however, slippage during execution can eat away most of the profit and make the loss even worse. If you think about it, say it costs me $40 bucks to get in and out (.20c slippage each time), that's almost 5% on a trade with $845 allocated.

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