/ES Hedge

#ButterflyHedge – Just for fun…centering it down near last week’s lows expiring this Friday…

Bought to Open BUTTERFLY /ES APR 18 (Wk2) 2560/2550/2540 PUT @ .35

I did it 5 times risking 90 to make 2400

A Tale of Two Hedge Flys

I wanted to put on a QQQ #ButterflyHedge. So I looked at two setups in January. First I checked the lower expected move for Jan expiration and it’s around 149. So I set up a 153/149/142 broken fly, only .25 cents. Positive theta, a nice amount of negative delta, but NEGATIVE VEGA, and downside risk if the fly is blown. When you are already looking for a down move, the negative vega on a hedge fly will fight you all the way. Time is your only friend at that point, and in a crash, your friend moves slowly.

2nd setup: 153/146/142. 3x the cost of the first one, but I have 158 negative delta, theta is -5, but vega is now positive 55. In a down move with volatility expanding this will come in much more quickly I think than the first setup.

Hedges–usually wasted money. But I just really want a little something extra on going into the new year. Best to do it while vol is low. So I’m in 153/146/142 for .75 debit. I can sell some shorter-dated put spreads against this if I want.

Looking forward to comments!