What are broken wing strategies and how to trade them

DanPickUp

Well-Known Member
#21
Yes , I prefer strategy where I do not have to do much once I enter the trade. This is not because I am risk averse or because I don't like to take challenges ( or else I won't be dabbling in trading options anyway). It is simply that it is too early for me to try strategies which require frequent adjustment. I would definitely try some advanced stuff once I get the hang of trading these strategies.

I have looked at the four strategies and as you say there is no question of pros and cons. In all the strategies, even if you don't do anything after entering the trade, you will not make loss. The profit will depend upon how the market moves.

One has to have a trading plan and the KNOWLEDGE. I suppose the strike prices of various legs is one of the important aspects in implementing all the strategies.

I tried to test a couple of these strategies in OptionsOracle but could not succeed in keeping maximum loss to zero.

Why do you feel margins is a big problem for our markets? For nifty if there are two short legs, the margin of 50,000 per lot is not high. For stocks it will be much higher.
I am eager to learn more. :)
Thank you very much.
Regards
gmt900
@Gmt900

All the four above shown ways are done true leg in by analyzing price action and according actions to it. As I do not teach any shynt in open forum, I did remove the information about the legs in those two pictures. None of those strategies have been implemented at once. So that seems to be not your world.

About margins: If this is ok for you, then fine. Some not even have that amount in there accounts and want to make what ever with it. :confused:

If you want to reduce your risk, you really may go with credit spreads. As I see you following Healthraj thread, you can use his information to play around with the two legs or you start to follow Ananths thread http://www.traderji.com/options/88865-nifty-options-vertical-spread-trading.html#post838993 If you have bigger money in your account, you can trade more lots with credit spreads. Always check the big trend picture like one week and place your call credit spreads or put credit spreads according to that information. Include math like standard deviation for your placements and check the positions daily.

Your choice, your money, your time, your live. :):)

Take care / DanPickUp
 

comm4300

Well-Known Member
#22
waiting for a day when i too have courage to leg in like Dan and bring my risk graph above zero line.

this entire activity looks like a chess game...lots of scenarios to think over.

if this then that....

then its no longer about money but about being ready to take action when things go wrong...

awesome style Dan....looking fwd for more inputs from you....
 
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#24
@Abcpankaj

That book was posted some time ago by Comm4300. But thanks to mention it again. Here the autor: J.L. Lord

As you now seem to have read that book and know the pros and cons, do you trade them now in your Indian market?

As you say: On breaking the wing , butterfly turns into simple ratio spread which can have unlimited loss. Any better idea from your side or how do you handle such events? Did you ever face live such an event and if so we would be pleased to see when it happend in the past?

Take care / DanPickUp
@Dan
I read that book & did some back of the envelope calculations , but do not trade it.
Returns as a percentage of High margin required here, were not very attractive.
That too with large risk when one omits (not shifts ) last leg of butterfly.
But that was the case when india vix was around 15 which has nearly doubled to 30 , this may affect the calculations now.

regards
 

DanPickUp

Well-Known Member
#25
@Dan
I read that book & did some back of the envelope calculations , but do not trade it.
Returns as a percentage of High margin required here, were not very attractive.
That too with large risk when one omits (not shifts ) last leg of butterfly.
But that was the case when india vix was around 15 which has nearly doubled to 30 , this may affect the calculations now.

regards
@Abcpankaj

Did not expect that you give any answer to that little questions. So thanks to come back and post your views. Did read that book in the past and it was a nice add to other things.

As you have gone true the thread and have seen the questions of Gmt900, what would you recommend him to do in his situation beside what I recommended? Different views would give different ideas. If you feel to make further post, I guess many would appreciate that.

Take care and enjoy your weekend / DanPickUp
 

comm4300

Well-Known Member
#26
@Comm4300

Read here about the leg in part of option trading: http://www.traderji.com/options/66266-option-trading-danpickup-6.html#post648489

Take care / DanPickUp
Thank you so much Dan.

Read it at least 3 times...to understand and imprint it.

makes sense now.

to ask further, you mentioned about matrix...can you elaborate on it....

and

how do you tackle when situation goes wrong...your view of the mkt goes wrong...you exit OR there is a further strategy involved.....

and

when you have a view of market...what option strategy do you choose....like for example...you think nifty will go down...so you leg in by buying Put option...

now nifty has gone done....so you have many choices....sell put to make it a vertical spread....
sell 2 or more puts to make it ratio....or even a butterfly....

or just simply buy back the naked put which is in profit.....


i am trying to understand the thought process that pros like you have....


thanks again for your contribution and knowledge sharing....
 

DanPickUp

Well-Known Member
#27
@Comm4300

Test a while what is posted and then come back with your left questions. Ok. :) I can post days and days, but you have to test it by your self. It is all there. Take a chart and if you are affraid with real money, make paper trades with any of the different entry strategie. Compare them and use what makes sense for you. Will take a while to see the differneces, but just do it as I had to do it. No sense for me to post that all for free here. I already have given basics which is not published any where, so the rest is yours.

Now relax / DanPickUp
 

comm4300

Well-Known Member
#28
@Comm4300

Test a while what is posted and then come back with your left questions. Ok. :) I can post days and days, but you have to test it by your self. It is all there. Take a chart and if you are affraid with real money, make paper trades with any of the different entry strategie. Compare them and use what makes sense for you. Will take a while to see the differneces, but just do it as I had to do it. No sense for me to post that all for free here. I already have given basics which is not published any where, so the rest is yours.

Now relax / DanPickUp
will do. thanks.
 

gmt900

Well-Known Member
#29
Thank you so much Dan.

Read it at least 3 times...to understand and imprint it.

makes sense now.

to ask further, you mentioned about matrix...can you elaborate on it....
and

how do you tackle when situation goes wrong...your view of the mkt goes wrong...you exit OR there is a further strategy involved.....

and

when you have a view of market...what option strategy do you choose....like for example...you think nifty will go down...so you leg in by buying Put option...

now nifty has gone done....so you have many choices....sell put to make it a vertical spread....
sell 2 or more puts to make it ratio....or even a butterfly....

or just simply buy back the naked put which is in profit.....


i am trying to understand the thought process that pros like you have....


thanks again for your contribution and knowledge sharing....
.I think what Dan means by this is you have a pictorial view of the strategy with various alternatives using a software like Options Oracle
 

DanPickUp

Well-Known Member
#30
@Comm4300

To make it short: Visualizing any strategy is what can be done with those matrixes. It is called: Trading options visually. Its a specific style to trade options.

If situation goes wrong, we have our stop loss or we convert in an other strategy or we take out all legs we implemented until now in the market. Everything can be done. It all depends on the given situation and with how many legs we are already in the market and how many strategy we know how to handle. The matrix can help us to find the right leg/s we have to choose for the next step in case we want to stay in the market with what we have done until it got stressy.

Choosing the strategy: We can work with three or four strategies at all the time and use others when feeling so. That is at least the way I do it. So for the broker I am not predictable.

Strategies I use regularly:

-Credit Spreads
-Synthetic Credit Spreads
-Back spreads
-Synthetic Back spreads
-Long and short Strangles
-Long and short Straddles
-Synthetic put and call
-Long broken wing iron condors
-Synthetic broken wing iron condors

Criteria s to choose either of the strategies:

First: - Trend in the market (Up, down, sideways)
Second: - Volatility in the market (High or low)
Third: - Time frame I want to be in the market with that strategy (Aggressive and active only a short time or passive with a strategy far away from expiry)

Some other criteria:

- Money and margins required for the strategy (Some strategies require little margins and others require a higher amount of money to entry)
- Events like Fed information and what ever is important for the market we want to trade

Even if some of the above sound may complicated, the rule also here: It must be simple. The trading plan is as following: First the trend, then the strategy and then the final. That's it. The idea is not to hang around with one strategy at all the time. If traded aggressively then quickly bring it over or as near as possible to the zero line and if traded passively, far away from expiry, time has the priority and not the zero line. Why? Those far away strategies from expiry are only short strategies and the shorter time frame trades are mostly long strategies.

Hope this helps. But as told: You have to play by yourself with those strategies on the matrix. It needs some passion to do so. At begin it may is a bit boring but as time passes, you will get quicker and quicker.

Take care and have a nice Sunday / DanPickUp
 

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