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Locke's BB adjustment advice

Discussion in 'Options' started by murph567, Nov 26, 2015.

  1. murph567

    murph567 New Member

    Hi everyone,
    I'm hoping someone can offer some advice on adjusting Locke's Bear put butterfly.
    Last week I put on a Jan monthly position, it was just under the 56 DTE. The RUT was at 1180 and the short strikes are at 1160. On Wednesday the RUT was very close to 1200, but just shy of adding the second 1/3. My current delta / theta ratio would indicate that I need to roll up my first 1/3 from 1160 to 1180. Now since you never move the ref point up, 1160 is still my ref point correct? What I'm wondering is if I make the adjustment and roll up 20 points to 1180 and then the RUT breaks through 1200, would I add the second 1/3 at 1180 since my ref point is still 1160? That would mean I would have 2/3 of the position on with it all at 1180. I'm not sure now, if come Friday the RUT is over 1200, if I should leave the 1160 and add the 1180 or roll up first before adding.
    I'd appreciate someone's input. Thanks.

  2. uwe

    uwe Well-Known Member

    When you have to do a roll, you would add further butterflies at the money. 1200 in your case.

    Regarding your second question: If the add fixes your delta-theta-ratio (which I doubt), then it's fine to just do the add (the roll will follow shortly then). But you might as well do both.
  3. murph567

    murph567 New Member

    Ah, yes that makes sense since his rule says to add "20 points above the first butterfly". Thanks for the advice.
  4. Andrei

    Andrei Well-Known Member

    I am probably late to be able to help with your trade, but it may help next time.

    I found that I can no longer trust the Var model to give me a reliable Delta/Theta ratio. Now I have to look at the EIOIO (sounds like my donkey;)). Then I make my decision based on some combination of the two.
  5. Bruno

    Bruno Moderator Staff Member

    I haven't so far seen a Delta/Theta problem yet on this trade, regardless of the vol model bin used. Screen Shot 2015-12-04 at 10.47.36.png
  6. AKJ

    AKJ Well-Known Member


    There isn't now, but I did notice a delta/theta ratio issue before the sell off the past two days. If you go back to last Friday (11/27/15) around noon, you see an issue right as you are about to add your second third.

    Also, your OV analyze chart looks a little curious. Your T+0 and T+21 P&L graph on the downside falls below your expiration graph, which seems incorrect.
  7. Andrei

    Andrei Well-Known Member

    Seems strange. Check you TLog, and mark the R field with the same number or letter. May fix it.

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