Reverse Iron Butterflies

[frank1212]

I signed up for the service optionscholar.com I mentioned in an earlier post and it is quiet interesting. The service specializes in day trading reverse iron butterflies. I have not heard of many people doing this. This morning they made 2 trades each for 12.2% return. The first trade was in a matter of minutes the second about an hour. Is anyone familiar with reverse iron butterflies? I feel it is a trading strategy often overlooked. I know they are designed for volatility but they virtually got in and out with out any movement.

 

[Martinghoul]

I am not sure these strategies are particularly overlooked. They're just normally too costly in terms of bid/ask, which is why it's rather strange that these guys managed to get in and out w/o movement and somehow made money.

 

[frank1212]

I think the big spread between the bid and ask is what makes it work getting good fills with limit orders

 

[Martinghoul]

I think the big spread between the bid and ask is what makes it work getting good fills with limit orders

Erm, no, if you think about it carefully, you will realize that this can't be right, as it implies that mkt-makers are, quite literally, giving you money for free. Only in some sort of fantasy universe is a big bid/ask good for a price taker...

 

[frank1212]

http://m.youtube.com/watch?v=uzhLNi0F1qA

How would this video be explained?

 

[Martinghoul]

I need something a little more recent than Jan 2013 to be able to tell what's going on...

 

[frank1212]

Why is that?

 

[Martinghoul]

Why is that?

'Cause in order to examine the trade and if/how/why it has worked, I need to be able to see what went on... A trade from more than 1y ago is hard to dissect.

 

[jeffre4]

apparently he turned 7000 into 70000 in one year so he should have plenty of trades to show you.

 

[tanvirmk]

Anyone else tried this service? Their gain is too good to be true. Would like to hear reviews. They don't offer trial period.

 

[lloydbee]

why not tell the trade as it was, strikes/prices, but to me it siunds like a theta scalp or maybe it was a virtual trade in which case the pruces were exagerated

 

[Windlesham1]

are you saying sell the wings buy the body?

 

[lloydbee]

* deleted after noticing the linked video

See reply below

 

[lloydbee]

How would this video be explained?

I can do that.... simply put they are Vega scalping....
The trade is just BTO ATM Vertical Spreads and consists of a Call Spread and Put Spread with the same Long Strikes (a profit capped version of Straddle/Strangle) and of course with the same Expiration. It's good in the fact that its Risk/Reward is heavily one sided but it's downside is Theta crush which is why you would be doing this on a volatile day and using Opening Volatility would also help.

A couple of points...

• ($VIX) Volatility was moving that day (Daily move was $16.85 Low -$18.99 High)
• Options are 1 day from Expiration so they price swing

It really is no big deal but if they were so good why wouldn't they upload a more recent trade or several. Uploading a video from Jan 2013 in Feb 2014 is pretty weak.

We all have trades like this, I have done several of these with Butterfly's and am more than happy to dig up some trade history.