Hi, Darrell. I am a bit confused by all of this. But if I understand it correctly based on what you have said on TFNN and some of the tutorials on Apex Investing, you do iron condors and straddles only with box spreads, and you do butterflies and strangles only with binaries. Is this correct?
And what are iron butterflies? Where are they used - with binaries, or with box spreads?
Thanks.
Also, when using spreads can you interchange them? For example use a 100 point on a buy and a 200 point on the sell?
You can mix up however you want. Just understand the impact of doing so - ie different expirations - or if same expirations differenc floor/ceiling (if the floor and ceiling is the same with same expiration time your price should be the same so the 200 point would be the obvious choice)
[quote=options888]Also, when using spreads can you interchange them? For example use a 100 point on a buy and a 200 point on the sell?[/quote]
Don’t really worry about the names. But yes commonly i refer to strangles/iron butterflies on binaries and straddles/iron condors on spreads
You can do premium collection on both - though binaries the opportunity is there more often - spreads you need a lot of IV built in for it to work (ie pre news pricing)
[quote=dennislondon]Hi, Darrell. I am a bit confused by all of this. But if I understand it correctly based on what you have said on TFNN and some of the tutorials on Apex Investing, you do iron condors and straddles only with box spreads, and you do butterflies and strangles only with binaries. Is this correct?
And what are iron butterflies? Where are they used - with binaries, or with box spreads?
Thanks.[/quote]
I watched the video “Iron Butterflies On Nadex Binaries For Range Bound Premium Collection” and there is nothing in it that talks about the difference between Butterflies vs Iron Butterflies when using Nadex.
Are they the same?
I’m confused since there is a difference when trading other options as in the definition below.
[COLOR="#FF0000"]
The Iron Butterfly Spread is a complex, advanced neutral option trading strategy built upon the foundation of a Butterfly Spread and is a high probability and safe way of profiting from a stock that is expected to stay stagnant or trade within a narrow price range.
Studying the Butterfly Spread first makes the Iron Butterfly Spread easier to understand.
Find Options Strategies With Similar Risk Profiles Find Options Strategies With Similar Risk Profiles
There are some important differences between the Butterfly Spread and the Iron Butterfly Spread though:
A Butterfly Spread consists of putting on 3 option trades at once whereas the Iron Butterfly Spread consists of putting on 4 option trades at once in order to attain a higher potential profit than a basic Butterfly Spread. This also makes it more costly for traders with a small fund to put on an Iron Butterfly Spread due to the higher commissions involved in having an extra leg to the position.
The Iron Butterfly Spread differs from the Butterfly Spread also in that the Iron Butterfly Spread results in a net credit whereas executing a Butterfly Spread results in a net debit. As a complex credit Spread strategy, most online option trading brokers will not allow beginner option traders to put on an Iron Butterfly Spread due to margin and trading level requirements. Only veteran traders with high trading levels and a fund big enough to fulfill margin requirements are allowed to put on Iron Butterfly Spreads. Traders need to check with own brokers as to the criteria needed to allow the trading of credit Spreads or Iron Butterfly Spreads.
The Iron Butterfly Spread’s Profitable Range is also much wider than that of a Butterfly Spread on the same underlying asset at the same strike prices due to the unique combination of 4 option trades instead of just 3.[/color]
[quote=s_mark220]click here:
http://apexinvesting.net/forum/news-trading-nadex-64/iron-condors-spreads-598.html [/quote]
Iron means you collecting premium
We don’t really do butterflies on nadex we do strangles
We do iron butterflies for premium collection (since we don’t really do butterflies often bitterly iron butterfly are interchanged in posts [though this is not accurate but is understood as we don’t do traditional butterflies] etc)
So basically don’t get caught up.in the names your making it harder than it is just the strategy us the focus
Your trying to compare traditional vanilla options to binaries and spreads they aren’t all strokes are defined… The names have a similar risk reward model not the same but similar…you only have 2 contracts so the whole 4 contract commission thing is not valid…I can go on and on about the differences . floors ceilings strikes are built in not created like on vanilla options…we could so a 10 hour conversation and 50 page of forum.posts.on comparisons strikes etc…but bottom line it’s 100x.simpler than that
If range bound buy lower and sell upper strike (what we call an iron butterfly)
If breakout buy upper and sell lower (what we call a strangle)
We can dive into philosophy of language and that is words have no inherent meaning except those assigned to them by a conscious mind and have no benefit in communication except.for those who both agree on the meaning of the audible sound or written form of it or visual sign form.of it
We have assigned these meanings to the unique nadex contract combinations to make it clear to those trading nadex instruments and have some.crossover for this very.familiar with options though with the variances in the instruments they may or may not be terms fully transferable to other instruments but will be mostly applicable
You can watch the webinar under webinar recordings I did last Thursday under Thursday am webinar in the last hour I broke down a variety of option strategies and how they compare to nadex
That may be most helpful
Great question and I understand the confusion I hope I helped answer it
If not or if you have any other questions please don’t hesitate to ask
Got it, Thanks for clarifying… Have a Great Christmas Everyone!
Merry Christmas
Sorry for all the typos doing all this on my phone while traveling
Regarding source of option information
“Iron butterfly is a safe way of profiting” it’s a way…safe is a very relative term the strategy itself is not inherently safe or overly risky…how it is done price timing etc many factors influence the safety factor…
Studying butterfly first makes the Iron Butterfly easier to understand… true we would say studying the strangle first…them learn iron butterfly
A butterfly has 3 vs an iron butterfly has 4 legs… This is completely inaccurate in traditional options there is only ever only 3 strikes being used and always 4 contracts … whether your Combining Call strike high Call strike atm x 2 Call strike lower
Or put higher Put 2 atm Put lower
Or call strike higher call atm put atm Put lower
(Atm is general example does not have to be atm) You could use any of the three above in all cases only 3 strikes are used
The difference between iron and non iron is is it a credit if within a range or a debit requiring a breakout of that rang It could be call callx2 call : call callx1 putx1 put :put putx2 put…In all cases 4 contracts are needed…so commissions are the same regardless
The credit is a misleading term as its time is in your favor as against you but in all reality both will result in the initial net debit of you account …
Most options brokers will let you trade this its defined risk…This statement is very outdated that brokers will limit you and you have to be a veteran
Margin could be higher on either iron butterfly or butterfly risk is not inherently higher on a iron butterfly it all depends on strikes premium iv etc… so Statement more risk margin required is not a always Statement as stated
Profitable Range is wider on a iron butterfly than on a butterfly … Also inaccurate… again they all have 3 strikes…and butterfly could make more an iron butterfly could make more
Actually statement 3 and 4 conflict…to state higher margin and more profitable range does not go together … larger profit range means smaller risk and vice versa when being applied to butterflies and iron butterflies
Suggestion is delete the source that provided this info as it is wrong…
When you start spreading out strikes on traditional a options and get 4 strikes it will move into condor albatross on and on and on territory
[quote=options888]I watched the video “Iron Butterflies On Nadex Binaries For Range Bound Premium Collection” and there is nothing in it that talks about the difference between Butterflies vs Iron Butterflies when using Nadex.
Are they the same?
I’m confused since there is a difference when trading other options as in the definition below.
[COLOR="#FF0000"]
The Iron Butterfly Spread is a complex, advanced neutral option trading strategy built upon the foundation of a Butterfly Spread and is a high probability and safe way of profiting from a stock that is expected to stay stagnant or trade within a narrow price range.
Studying the Butterfly Spread first makes the Iron Butterfly Spread easier to understand.
Find Options Strategies With Similar Risk Profiles Find Options Strategies With Similar Risk Profiles
There are some important differences between the Butterfly Spread and the Iron Butterfly Spread though:
A Butterfly Spread consists of putting on 3 option trades at once whereas the Iron Butterfly Spread consists of putting on 4 option trades at once in order to attain a higher potential profit than a basic Butterfly Spread. This also makes it more costly for traders with a small fund to put on an Iron Butterfly Spread due to the higher commissions involved in having an extra leg to the position.
The Iron Butterfly Spread differs from the Butterfly Spread also in that the Iron Butterfly Spread results in a net credit whereas executing a Butterfly Spread results in a net debit. As a complex credit Spread strategy, most online option trading brokers will not allow beginner option traders to put on an Iron Butterfly Spread due to margin and trading level requirements. Only veteran traders with high trading levels and a fund big enough to fulfill margin requirements are allowed to put on Iron Butterfly Spreads. Traders need to check with own brokers as to the criteria needed to allow the trading of credit Spreads or Iron Butterfly Spreads.
The Iron Butterfly Spread’s Profitable Range is also much wider than that of a Butterfly Spread on the same underlying asset at the same strike prices due to the unique combination of 4 option trades instead of just 3.[/color][/quote]
