Wednesday, March 10, 2010

03/10 NDX Fast Butterfly (from 03/01)

No major change from Yesterday. One thing I have been noticing on these butterflies is that the P/L is all over the map during the intra-day price action, I’ve seen going from -10% to -15% in just a few clicks without any major price swings.. I think the spreads are really wide and that causes the oscilation. What I’ve been doing to gauge my progress is to look at the Greeks and try to get a feeling. I knew from Yesterday my biggest exposure was vega, but looking at Today’s vix you’ll notice that it actually increased despite of the up-day. So I didn’t get out of the trade when it was showing me down by 15% (stop level)..
This puts a little bug in my ear: how am I going to exit these butterflies if their spread is so wide? How much will I have to give up in order to get a decent fill? Well, I’ve been dwelling on this, and as a matter of fact will start next week as an Iron Butterfly instead of a direct call/put butterfy, at least with the iron butterfly (calls & puts) I know I can use strangles to remove my short call&put contracts without major delta exposure..

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