Is anyone running this? It's been tested to have a exceptionally high win rate.
The combination is a broken wing butterfly which pays a credit, then adding a reverse put diagonal or put calendar. The dte is about 8-10. It creates exceptionally long break evens.
Here's the breakdown
The shorts are the peak of the tent structure, the long far OTM call is where you think price will not pass. Depending where the shorts are placed further out or closer together, or slightly closer on one side will decide whether neutral, bullish or bearish stance.
This morning I was paid a credit to open a bearish flyagonal, the news said talks were made but I'm betting it's a lie and attacks on the strait will continue. I received $150ish credit for the broken wing butterfly, and paid $110 for the reverse put diagonal. I'm betting the price will reject at $672 where resistance was at, and we'll come back to around $645.
This is a neutral variation of the structure, now the breakeven from put side went from $626 to $636, and the break even on call side went from $671 to $675. This costs a debit to open now. If price drops, IV will pick up the break even on put side will widen very quickly offsetting losses. If IV drops, as price appreciates our curvature will benefit call side slightly.
CONCLUSION: This structure offsets the wild movements of vega, it's the best combination of structures I've ever seen. The goal is to take profit at 25%. Actively managing: If call side is breached sell put credit spreads to offset losses, if price pulls back it turns the butterfly into a downside hedge. If the put side is breached, roll the short OTM daily to turn into a calendar then diagonalize.
Flyagonal (Broken Wing Fly + Put Diagonal)
byu/breakyourteethnow inoptions
Posted by breakyourteethnow
2 Comments
This is interesting, have you done any backtest8ng with this strat?
interesting structure but “exceptionally high win rate” is doing heavy lifting here. any strategy that targets 25% profit on a complex 4-leg structure with active management is gonna have a high win rate bc you’re taking tiny profits relative to the risk. the real question is what happens when it goes wrong, how bad is the max loss when both sides get breached simultaneously in a gap move? the active management part sounds good in theory but rolling shorts daily into a calendar during a fast move is easier said than done when spreads widen