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How to Trade the Iron Fly Strategy | Options Trading Concepts
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- Опубликовано: 24 авг 2017
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FINALLY!!! Somebody who explains WHY they are doing what they're doing. Thanks.
This is a good video. It is geared toward seasoned traders who understand options very well. Amateur traders would be lost within seconds.
I would add few things.
First, there is nothing to stop you to trade it in your IRA account. You just need to sign some agreements with your broker. Most brokers don't have these particular strategies in their option lists, but you can easily assemble short ironfly from two "Combo" strategies. These are available at Fidelity.
Second, he should have mentioned that this was a short ironfly (there is also long/reverse ironfly). You make money when underlying asset stays flat at expiration. It's a good strategy to do in the summer when volumes are low and markets don't move much (usually).
You're so right Jake - As someone starting off I was a bit lost BUT your comments and me slowing the video down to .75 playback speed made a world a difference. Thanks for the information.
Mike how comes you're so good at explaning this. I understand everything, but if I were to try and explain this to someone, it would be no way this articulate. Do you explain this a lot or do you just know it so well?
I explain these concepts a lot, and I know a little bit too!
So the break even for this trade is 82.50 and 77.50? And anything in between these two break evens is profit. I love it
Wich delta do you recomend to used on the long options?
You’ve probably done this already but I would like to see an example of a successful straddle and a successful iron fly N the basis for which you chose those strategies at that time?
interesting to think about only closing the short that's ITM
Thoughts on choosing your long option strikes based on delta like one would with a dynamic iron condor? With your short options ATM (50 delta) this would be like 25/50/50/25? -ish? Any backtesting done in this area?
Yep! Go to this link below and search for "dynamic iron fly" - there are a bunch of segments:
www.tastytrade.com/tt/search
Hi, Is it ok to keep break even levels as stop loss, to exit the trade and enter a fresh iron butterfly trade. your insight in this matter will be greatly appreciated. thank you.
Please forgive my confusion here, but other literature talk about a straddle as a defined risk strategy. Your max loss is the premiums you pay for the long put and the long call. Can you help clarify my predicament.
Is there such a thing as Reverse Ironfly(Long vs Short), and if so is it also worth considering?
There certainly is, and it's a trade that people make when they expect a big move, but are unsure of which direction. NOt something we typically do, but it is a strategy.
Can you risk getting assigned on either of the short strikes intraday if you open the position at market open and close the position before market close? There will still be extrinsic value in the ITM short strikes so I don't think it's likely to get assigned if that's the case.
Nope! Assignment happens after the market is closed, so if you hold an option overnight, it has the risk of being assigned, unless it's a cash secured instrument like SPX where early assignment does not happen.
tastytrade thank you sooooo much! This is so gonna be my month.
really nice explanation
Great content Mike
typically what should be the position sizing for this strategy
Good strategy....
I don't see this as an pre-built strategy on the Tasty platform. Is it considered something else now?
Great video! Question, let’s say you took in a credit of $5. Then you bought the call/put at $5 away from the short call/put. Would that make the position at zero risk?
If you bought that option for $0.00 then yes, but you'll pay something for that option, and it only being $5 away from your short option, you're probably paying a big chunk of cash, so your net credit would drop to lets say $2.00 on a $5 wide spread, so your risk would be $3.00.
Hi Mike, how do we adjust iron fly if they goes wrong?
Hi Brandon, Here is more on Iron Fly Management: www.tastytrade.com/tt/learn/iron-fly
Is it better to do this trade in high or low IV instrument?
high IV = wider breakevens so that's what I'd go with
@tastytradermike
is this for telegram or which social media ?
Very nice
Great 🇮🇳
Lovely
does the distance between the short ATM options and the long call and put options have to be the same?
for example, could I sell a put and call at the 26 strike, and then buy the put at the 23 strike and the 30 call strike?
how does this effect the trade?
this would skew the risk can do to have a directional bias
This strategy works best when earnings come out
Hi. This is a tax question but i hope someone can help here. If i roll my short option that is in red at the moment into next year, can i write off the loss from my taxable gross?? And if i profit next year, can i put it into my next years gross? I m moving to a lesser tax state, so it could be important.
It really depends - I suggest reaching out to a tax professional for this answer. Sorry we could not be more of a help!
I just bought the book "The Tax Guide for Traders" by Robert Z. Green (amzn.to/2xp4JlN) . I have NOT read it yet but it comes very highly recommended. He also puts out regular updates for tax year changes (amzn.to/2xeSvwB). Like tastytrades said, best to check with a pro for "official" answers you would actually use. Hope this helps!
Ridiculously improbable profit play…Stocks move, so likelihood it ends at same strike price is approximately zero. This is a terrible strategy. Iron condor is WAY better win %.
What company do you work for? Are you taking in new clients? What is your commission charge? 😂
y call it iron fly? iron straddle seems better.😅