Good Evening,
Thanks for your replies both Chaz and Ronin, I hope this post will cover all that you guys have asked.
Chaz - as far as the charts I can post some for you, however for this most recent week I don’t have a whole lot as my NT7 is draining my whole computer and I did not keep Jing running as its just another draw of Ram and I need all I can get but I have some I can post! In addition I am going to attempt to record a full week of my trading and from Sunday night to Friday, showing everything I do from setting them up, picking the options, placing stops, managing the trade all of it, I feel this would be extremely helpful and answer a lot of your questions, on low IV weeks there is no boiler plate method its takes some skill to tinker with these trades and needs to be seen as it unfold its tough to explain.
Ronin - Yes there has been some refinement but the main change is the time periods Im trading now, the original video was of me doing longer term IBF’s like 20+ hours and I do stand by most of that material as when I do the IBF’s longer term I use deviations and magnets in which i do not use when i do them on shorter time frames like the 6pm - 3am or the 1:30pm - 11pm ect. I will say the success rate has dramatically increased with the use of stops and trading these on certain pairs at very specific times, this is not to say I don’t take some longer term IBF’s but the majority have been on the USDCAD USDCHF GBPUSD EURGBP.
-For example you reference “triggers” and “stops”. You also have single wing butterflies? This to me implies that you are entering one side based on your analysis and the beginning of you long time frame to get the proper in the money pricing but then using a trigger to leg in to the other side should the market move in your favor?
Triggers - I often use triggers on these trades as the pricing I want is not available when Im looking for them or sometimes pricing is good on one side so I enter and set a trigger on the other side or sometimes I set triggers on both sides (These are often the ones that only one wing get entered) just a quick note its not an IBF if you only have one wing, at that point its just an ITM trade till the other side is on, and this is fine as long as you have a stop. On the trigger trades there are rare occasions when neither side triggers that just means you had you strikes too wide and that is ok too, its better to have them too wide versus too narrow, if there to narrow you gonna get stopped out, this is an important point here, when I set triggers I set them rather wide and monitor them and if some time passes I then readjust the ranges and see if its even feasible for price to get that strike triggered if its not, meaning that strike is like way outside the HILO range after you adjust the ranges then look for a new strike inside that one that makes sense price wise and range wise, don’t take anything inside the close to close that’s a suicide mission, best i can say is gonna have to practice this and get a feel for it as far as the management goes but a good rule of thumb is set them a little wider then adjust them if need be don’t set them to narrow and paint yourself into a corner, I think when IV returns the managing will be less bt when the IV is gone and you want to trade these IBFS you need to tinker quite a bit.
Stops-After toying with the not using them to using them just on single leg trades and then using them at all times even in two wing IBF’s I have come to a conclusion and that is USE them all the time, if you don’t you simply will lose in the long run and eventually zero out your account, you may get on a run but this is the market its going to ***** you eventually, don’t get a rock star trader mentality you will get burned, live to trade another day be a little more conservative and laugh all the way to the bank even if you trade at 50%, people who think they can get around using stops are setting themselves up for disaster and I was one of them but I went ahead and tried it all ways and that’s fine, now I know what needs to be done, just go look at my weekly results if it were not for stops I would have severely different results and out of the 3 weeks of data above stops have saved me more money then if I did not have them on. You don’t want to have any losses more then about $29 - $30 maybe $35 MAX if your having losses more than that your going to get behind that’s a fact. You have to look at the IBF setup as a mission and the mission is this, you want to ultimately get both wings on to really reduce that risk with the addition of stops of course, you may only get one on but make sure you keep that risk low with the stops - your work is not really done until you get both sides on with stops, like if I set up 3 IBFS from 6pm - 3am I keep monitoring them until I got to bed around 12am in that time if get all the sides on my job is done I put my stops on and go to bed, now does this happen every night no so the legs that dont trigger before my bedtime I cancel the orders for those triggers as you dont want a 3am exp triggering in at 2:30 while you sleep and you cannot get a stop on, when we get an oco ticket we will be ok on this but for now just cancel the order. So really what you want to be doing from the time you set these up till you go bed is essentially reducing your risk by getting as many 2 wing trades as you can, if you remember my projections at 25/75 with stops your total risk is $0 + exchange fees of course, so you see the power of both sides, however this is not to say I dont take one wing trades, they are still valuable to take but if you lose this trade its a $25 loss with a stop and thats ok because its inside the max$35 loss I mentioned above. If you look at my results last week almost 50% of my trades were one wing so theyare helpul but the end goal is to get that risk really low and get two sides on and this is where the art of this strategy is, you need to practice but if you get both sides on you should feel really good as you risk is so tiny.
Pricing - As far as the pricing goes I have taken trades at $15/$85 but I am willing to sacrafice on the pricing if can get 40 pip wide spread on EURGBP when I know that EURGBP for the past year only moves 4 ticks open to close from 1:30 pm to 11 pm and only 10 ticks hi to lo, thats and ultra safe setup and I would take it every time so there are times bend the 25/75 and to be honest its extremly rare to get it just look at my numbers on my results I have been averaging about $20/$80 over the last 3 weeks.
I suppose I am foggy how many stop triggers you are using and when?
I only use the stop trigger for the stops not the entry triggers, I just a Nadex limit order ticket with a option price trigger not the vindictive price like on the plugin. So the answer is 2 stops triggers on a two wing trade and one on a one wing trade.
In your previous video you mention not putting in your stops until 530 AM and letting the news play out and then entering your stops? Doesn’t that kind of defeat the purpose for an overnight trade?
I think the stops explanation above should have covered this, if not let me know! There is one time I would say to hold off on the stops and that is when I do strangled butterflies around news and thats because I have the strangle in there but this is for another conversation and I have actually written about it here if you would like to learn about it -
http://apexinvesting.net/forum/butterflies-218/iron-butterfly-strangle-combination-news-trade-1967.html#.VKXyj_ldW0I
http://apexinvesting.net/forum/butterflies-218/eur-usd-double-strangled-butterfly-eur-usd-news-trade-2110.html#.VKXyz_ldW0I
I’m not sure there really is an advantage to paying attention to news since the implied volatility should be accounted for in the options pricing and strike widths.
Yes, the prices will reflect the IV but never make the mistake of not checking on news first, always be aware!
Are you staggering expiration as well on the same underlying? I am just trying to interpret your data.
No, I always use the same exp for both legs I just get enter them at different times.
I know this is a lot to absorb but Im hopeful it has helped some, pleas send me any additional questions and I will try to get a video together of my week of trading for you guys that should unravel a lot of the mystery I think. A big key I have been learning from DM is the market is not static when it comes to IV its forever changing so you we as the traders need to learn how to one recognize when its changed and two apply the right strategy or alter our methods to be successful, like a good example is and I have written about it in results above, with the low IV over the holiday I had to get into a trade I usually setup at 6pm at 1pm just to find ok pricing so that was an effort to adapt to the low IV.
Well, that’s all for now!!
Look forward to hearing your questions.
Best,
-atrader2
