What does this mean?

General Trading Forum General Trading Questions
1

I have a butterfly position entered into yesterday. This morning the sell position after a few minutes went blank. What does this mean?

Should I try to buy and exit this leg of it?

I believe crude oil is going up. But will it continue until tomorrow @ 2:30? I believe so.

CLM7 may11.jpg1343Ă—348 110 KB

2

It’s back now… this is a demo account BTW. Still wonder what that meant and if I should hang tight or try and exit the “sell” leg.

CLM7 may11.jpg1343Ă—348 110 KB

3

That just means that there are no quotes available for that contract at that moment. Also, that looks more like a strangle than a butterfly. I would just hold onto it until it expires at this point. You never know, the market could come all the way back down for you. :slight_smile:

Peter

4

Hi timelord914,

Thanks for answering.

I thought a butterfly was selling the strike above the underlying market and buying below the underlying market… and a strangle is buying an OTM binary above and selling an OTM binary below, in a market with high volume. I would appreciate clarification as you are way more experienced. I am trying to learn a few simple strategies well and trying them out. :slight_smile:

Thank you!

1 Like
5

Yes you have that correct in your definition. But looks like you did it backwards here. For example you sold at $70. Which is an OTM contract with a $30 risk. That is an OTm contract. To do a butterfly you would have needed to buy for $70, and sell for $30 In the example above, the contract you sell should have been above the indicative, meaning it would have been priced close to around $25 sell, not a $75 sell. So you actually sold the contreact BELOW the indactive :slight_smile: Just keep in mind when you SELL for $70, that is an OTM contract with a $30 risk. So your set up here was a strangle, looking for big moves in the market. With a butterfly you are using both sides with an ITM contract and not expecting much of a move. Make sense? Just have to keep it straight in your mind the difference of a $70 buy and a $70 sell, completely different contract types ITM and OTM

1 Like
6

Thanks skeltonmark… my mind is twisted around for sure now! I will contemplate this and be more careful. Just when I think I’ve got it! LOL I ended up selling the one leg earlier… still feeling out my risk nerves and trying to pretend this demo money is my own little 500.00 and not 25,000!

May I ask another question? Ok, So, I saw that I had 25+ dollars profit in the Crude oil binary left in the now understood strangle and assumed that I could take the profit instead of riding it out until expiration.

I originally bought the CLM7 for 33.50 and then put in a working order to sell it at 57.50, which was picked up. Doesn’t that mean I made a profit of $24.00, less fees? I am not seeing it in my balance. Appreciate your reply. These are probably really simple questions, but I am trying to see the workings.

7

Strangle?.jpg1194Ă—567 180 KB

So is this a strangle? I bought at 36.75 OTM above the indicative of 5666.75 and sold it for 78.00

                I sold an OTM at 59.50 ... and then bought it for 99.75...

My balance shows a loss of 3.00. What did I do wrong? Help! I am determined to figure this out!

(P.S. I have no idea why the formatting shifted)