Tuesday, January 26, 2010

01/26 NDX Iron Butterfly

This trade posted an amazing recovery. The key in this recovery was the fast adjustment response I did earlier on. As we had the large drop I did the cut and roll and added the extra butterfly. Compared with the MNX iron butterfly where I did not increase theta as part of my adjustment, this worked much better.

Bottom line here is: if you have to keep your money on the market, make sure you have theta to get paid for the risk you're assuming. Leaving the trade hedged without theta for too long is a losing proposition in the long term.

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