Some Bearish Butterfly help

Discussion in 'Beginner Traders' started by mje, Oct 29, 2017.

  1. mje

    mje Member

    Hi, I just started getting familiar with the Bearish Butterfly trade, back testing with ONE and so far I very much like the trade but there have been situations
    that I have been having trouble with. The problem starts when I have already entered the trade with the first Bfly. I noticed sometimes that the price of the RUT will blow past both add points for the second and third Bfly. The delta/theta ratio is usually way above 1.5/1 which would require a roll of the lowest Bfly. I can roll up but I'm not sure when to add the next Bly's because I'm so far above the previous add points. What I have been doing when this situation happens is roll the trade up (which doesn't always fix the delta/theta ratio, and check and see what adding one more Bfly will do to my greeks. If things still look too risky I close the trade and move on to the next one. Because I am using optionNet Explorer and not optionvue, I realize that it could be the reason why I am having some problems controlling the trade but all the examples and greeks given in the Bearish Butterfly program worked fairly well with ONE when I back tested them. Anyway, has anyone experienced anything similar? Or am I missing something obvious? Thanks for any help

    MJE
     
  2. status1

    status1 Well-Known Member

    I don't think you are missing anything I just think the strategy is difficult to mange in this low vol constantly moving up market with very few pullbacks but that's just my opinion
     
  3. Duane Glick

    Duane Glick Member

    With just the 1st 1/3 Butterfly on and you blow past your next two add points/delta roll points your loss is probably still less than if you would have been able to make the additon of the 2/3 and 3/3 butterflys and the market went up,So you should still be well below max loss . I think the guidelines indicate that you can delta roll the initial butterfly once and then add your 2nd butter and then you can do a delta /theta roll one more time . You said "if things look to risky " well ,this is a trade that you have to be willing to go max loss on ,it's the way this strategy was tested . Live trading the BB can be scary at times .The greeks in ONE will work better with the BB than the M3 but OptionVue is still the best for these two strategies .
     

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