Location: Sussex, UK
Are there any options gurus here? I'm currently trying to wrap my head around Iron Butterfly/Condor Spreads as a safer instrument to use than just vertical spreads..
The theory being that stocks like Apple, Google, Amazon etc are volatile each week and setting up weekly spreads that take advantage of this should make regular money with out being direction dependent..
I know that weekly options decay very quickly. However, I keep reading sites that say they don't touch these volatile stocks because they are too volatile. They prefer to set up premium collecting spreads on indexes like SPY, Russell etc..
I'm interested in doing the opposite with the volatile stocks.
For example, Apple has a weekly ATR of around $33. So we can assume that, over the past 21 weeks, Apple has moved an average of $33. My plan is to sell an at the money Iron Butterfly or Iron Condor for each new weekly option on the Friday just before the market closes. That way, much of the weekend decay has already occurred already.. The price should move out of the top or bottom of the range and I should profit.
I set one up last Friday on the $415 strike price..
Sell 1 x 410 Put
Buy 1 x 415 Put
Buy 1 x 415 Call
Sell 1 x 420 Call
To profit, apple has to move above $420 or below $410. So Apple moves $15 today (Monday) up to $430. My profit/loss still fluctuates positive and negative but it is generally positive.
I closed the trade but it only closed at a break even.. Generally, do I need to wait until expiration to realise the full profit? I thought that as Apple had moved $15, that might have been enough for me to realise a profit but it doesn't seem to have worked that way..
My account is with Interactive Brokers (confusing platform! Very difficult to figure out how much I can make on a trade, risk etc..)
[Edited by Dan on 4/29/2013 12:13 PM]