This segment reveals the results of a study to determine if it is better to sell dynamic iron flies with 7 days to expiration frequently or to sell ones with 45 DTE less frequently. This should be of interest to all traders.
If you are new to tastylive, an Iron Fly is an ATM straddle defined with an OTM call and put at some strike distance away. A “Dynamic” Iron Fly, is where the long strikes of the trade are determined based on probabilities instead of distance from the short strikes. You may also want to watch the “Market Measures” segment from April 28th of this year to understand the pluses and minuses of one versus the other.
A study using the SPY (S&P 500 ETF) was conducted from January 2014 to present. We sold a Dynamic Fly (wings placed with a 84% OTM strikes) with 7 days to expiration (DTE) as well as one with 45 days to expiration (DTE) and compared them.
A table was displayed of both the weekly and monthly short Dynamic Fly. The table compared the P/L, percentage of winners. number of winners and average trade P/L for both. A second table was displayed of both the weekly and monthly short Dynamic Fly. The table compared the average credit, average margin required, average put distance and average call distance.
Watch this segment of “Market Measures” with Tom Sosnoff and Tony Battista to learn the takeaways and the results of the study comparing Dynamic Flies with 45 days to expiration (DTE) versus ones with 7 DTE.
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