I tried yours on Tasty, set the limit to 4.99 ... it filled at 5.02 ... BPR == 0
:)
In the past, I've snuck in some arbitrage by splitting the legs up into different orders.
Its fun to land one, but the premium isn't big $.
Well this still has the chance to payout big even without the arbitrage if SPY continues drifting up this summer, which is what I was going for. I figured I'd get in for $499 instead of $502 tho.
how does this profit from SPY moving up?
if SPY ends above 545, you're losing money on the call spread but making money on the ITM put spread.
also, you're forgetting about early assignment risk. if SPY drills to 460 in 3 months, you're likely going to get early assigned on the short puts. you can exercise the long puts immediately, I guess, to counter that.
The closer it gets to the mid strikes the greater the profit. At expiry this pays 10,000 if it is at 540.
If it gets close to 540 anythime between now and then it will be able to be closed for a good profit, I would exit this a week before expiry unless it is very close to 540 then.
Since I received 5.02 ( x100 = $502) premium for the 10/19 spreads.
if SPY ends up above 545 then I get $2 (- commission)
if SPY ends up below 535 then I get $2
If SPY ends up b/n 535-545 I make more money, and 540 will be the max at $502
I think this position may need to stay open very close to expirey
tho who knows .. I am not worried about early assignment
I just got it filled at -5.02 at IBKR. They usually don't allow riskless spreads, so this can't be one of them. My position is already marked at a loss, since IBKR's fair value is -5.17.
SPX and XSP won't give you one of these "riskless" fills, so I'm guessing it's related to the premium for American-style options. The short calls could be exercised early for the dividend, and the short put can be exercised early if the time value goes below the PV of the interest that the short seller would receive on his cash.
Assignment could happen soon on the puts because they include dividend prices. Once the ex-dividend date has passed, the value of the dividend will be removed from the time value of the short put, making assignment more likely.
This is definitely not the same thing, but it does have some similarities.
Ironyman did a short box spread, which is a perfectly legit strategy (see: BOXX) except he picked a poor underlying, and had the early assignment poorly handled by RH.
Short box spreads are delta neutral and only earn a very small amount through time burn, which means you probably have to hold them almost to expiry to profit. This has directionality to it, on top of time burn. As of today, about a 1/3 of my spreads like this I opened on Tuesday are slightly profitable.
This shares similar early assignment risk and the need to manage it appropriately to avoid slippage, but this is true for all ITM iron spreads. If I'm early assigned, it will necessitate contacting support for a broker assisted trade at open to manage. They may be less than helpful, I'll cross that bridge if and when I get there. Robinhood acting negligently is my number one risk here. In actuality, being early assigned should be an automatic profit as long as I dont exercise the long and instead sell it or reenter with a new short put. As long as that is done at open while selling the assigned shares at the same time if exiting, and neither side is left unhedged, slippage should be minimal. If I am assigned on all 28 of my ironflies at the same time and are assigned 1.5m worth of shares, yeah, it'd probably be the end of my account.
You're definitely not guaranteed to lose, but the market maker you traded with is still happy about their side. The only difference between a short box and a short fly is the dstance between the spreads, you're still losing to the exercise risk
I mean you could say that about any spread made of a combined call and put spread.
Of the possible iron spreads, a box spread is the outlier and the only one that is completely delta neutral.
An ironfly is closer to an iron condor than a box spread.
The thing is, the American box isn't totally delta neutral, nor would yours be. Not gonna argue about the condor vs fly comparison though, that much is definitely true from a risk perspective.
Brokers dont do the assigning the OCC in Chicago does.
These short puts have several hundred dollars of extrinsic I would be very surprised to get assigned.
I dont think early assignment should be too terrible a risk, the spread is fully collateralized with both legs of the put side deep enough ITM that if I get assigned it should be covered.
The main risk I see is
A) Robinhood closing the spreads early and forcing me to pay the bid/ask spread to get out before theta burns it below $5
B) Being early assigned and slippage happening between the legs when it gets closed out at that point. Early assignment SHOULD allow a big gain in theory, especially the earlier it happens, but Robinhood has a long history of handling early assignments in the absolute most asinine way possible.
If you get assigned early, you blow your whole collateral on fixing it and are left with a credit spread in which you received no credit.
I also checked the same play but for June 7, and it was at a credit of 507. Didn't check other dates, but otm butterflies are rough on theta. Edit: checked the itm butterfly on 520 for June 7th, and credit was 442.
I agree robinhood is your biggest risk with this.
If I'm early assigned I would be calling them at 830am begging them to just let me reenter the trade by reselling a new put credit spread, I'm hoping to avoid that and exit this in a couple months significantly before expiry while there's enough extrinsic to stave off assignment.
If you are assigned those put strikes and as far ITM as those are the delta is going to be pretty high and you are going to see some unrealized losses. If you don't close out the call side for max profit you are going to be net down, plus margin interest depending on how long you carry it.
And if it does happen early, you are still ahead as you have the 540P that can be sold off (along with the assigned shares) for with profit due to the extrinsic value?
(Head still hurting from this one)
Oh. I tried selling 0DTE ICs way back on an IBKR paper account but it wasn’t really instant even with 8-10 orders at market close when markets should be more liquid (?). Another question: why do you limit your trade by covering both sides of the trade (long and short)? Wouldn’t it be more profitable to sell slightly OTM put credit spreads. Been trying that out this week with a weekly on NVDA and it seems profitable. Of course NVDA options have more expensive premiums compared to their realised move so it is more probable to make money with it.
Exactly. ICs are combinations of minimum two opposite directional debit spreads = two one-directional debit spreads (?). So selling one IC or selling two one-directional debit spreads should be the same. Buying power stays the same (almost) but now you’re long one direction. Correct me if I’m wrong please
This is a short ironfly it is directional specific to a single price point which is the middle strike of 540. The credit is held as cash, and available cash on hand is set aside to cover the remainder of the width of one wing. Since these net credit greater than the width of one wing the entire trade collateralized itself with a small excess added to my existing available cash.
So you get max profit if price is 540 and the profit is the premium received.
Profit falls off on both sides as price increases to 545 or drops to 535 and profit becomes 0 at 545 and 535 and beyond.
Is that right?
They'll say you're overleveraged, youll need to either unwind the position to remove the restriction or deposit a significant amount. Or just hold for a while, which is what I'm doing.
I ended up opening 70 of these IC's across Jul - Dec. I could probably close them all now for about $4 each avg.
My max fill was 5.27 ,
I'd sell more, but I'll wait to see how these behave for a few months. I am thinking that as SPY may approach 550 before they expire, these may actually have a good payout.
Bought to close at $4.86, opened 13 more at middle strike 550 for $5.03 in credit, closed at $4.93, and opened 25 more a couple days ago for $4.99 in credit that are sitting at $4.90 currently. This strategy actually has been incredibly profitable so far.
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What's the capital requirement for such a position?
Yeah, you got filled on credit above max loss by the looks of it - 5.06 per spread, with max loss 5.00 - but what you are forgetting is opportunity cost.
Depending on capital required, you'd get a better return holding treasuries, with almost zero risk (unlikely the US gov defaults by october, but I suppose it is possible at a very small chance)
I tried yours on Tasty, set the limit to 4.99 ... it filled at 5.02 ... BPR == 0 :) In the past, I've snuck in some arbitrage by splitting the legs up into different orders. Its fun to land one, but the premium isn't big $.
Well this still has the chance to payout big even without the arbitrage if SPY continues drifting up this summer, which is what I was going for. I figured I'd get in for $499 instead of $502 tho.
yeah , as a $5 IC its better than a ten cent arbitrage
how does this profit from SPY moving up? if SPY ends above 545, you're losing money on the call spread but making money on the ITM put spread. also, you're forgetting about early assignment risk. if SPY drills to 460 in 3 months, you're likely going to get early assigned on the short puts. you can exercise the long puts immediately, I guess, to counter that.
The closer it gets to the mid strikes the greater the profit. At expiry this pays 10,000 if it is at 540. If it gets close to 540 anythime between now and then it will be able to be closed for a good profit, I would exit this a week before expiry unless it is very close to 540 then.
Since I received 5.02 ( x100 = $502) premium for the 10/19 spreads. if SPY ends up above 545 then I get $2 (- commission) if SPY ends up below 535 then I get $2 If SPY ends up b/n 535-545 I make more money, and 540 will be the max at $502 I think this position may need to stay open very close to expirey tho who knows .. I am not worried about early assignment
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Do they typically hold collateral for both wings of an IC?
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But if you received $501 then you shouldnt have reduced buying power? Idk, that's how RH did it but they're known for their negligence.
I just got it filled at -5.02 at IBKR. They usually don't allow riskless spreads, so this can't be one of them. My position is already marked at a loss, since IBKR's fair value is -5.17. SPX and XSP won't give you one of these "riskless" fills, so I'm guessing it's related to the premium for American-style options. The short calls could be exercised early for the dividend, and the short put can be exercised early if the time value goes below the PV of the interest that the short seller would receive on his cash. Assignment could happen soon on the puts because they include dividend prices. Once the ex-dividend date has passed, the value of the dividend will be removed from the time value of the short put, making assignment more likely.
This, you're losing to early exercise premium. Does no one remember ir0nyman anymore?
This is definitely not the same thing, but it does have some similarities. Ironyman did a short box spread, which is a perfectly legit strategy (see: BOXX) except he picked a poor underlying, and had the early assignment poorly handled by RH. Short box spreads are delta neutral and only earn a very small amount through time burn, which means you probably have to hold them almost to expiry to profit. This has directionality to it, on top of time burn. As of today, about a 1/3 of my spreads like this I opened on Tuesday are slightly profitable. This shares similar early assignment risk and the need to manage it appropriately to avoid slippage, but this is true for all ITM iron spreads. If I'm early assigned, it will necessitate contacting support for a broker assisted trade at open to manage. They may be less than helpful, I'll cross that bridge if and when I get there. Robinhood acting negligently is my number one risk here. In actuality, being early assigned should be an automatic profit as long as I dont exercise the long and instead sell it or reenter with a new short put. As long as that is done at open while selling the assigned shares at the same time if exiting, and neither side is left unhedged, slippage should be minimal. If I am assigned on all 28 of my ironflies at the same time and are assigned 1.5m worth of shares, yeah, it'd probably be the end of my account.
You're definitely not guaranteed to lose, but the market maker you traded with is still happy about their side. The only difference between a short box and a short fly is the dstance between the spreads, you're still losing to the exercise risk
I mean you could say that about any spread made of a combined call and put spread. Of the possible iron spreads, a box spread is the outlier and the only one that is completely delta neutral. An ironfly is closer to an iron condor than a box spread.
The thing is, the American box isn't totally delta neutral, nor would yours be. Not gonna argue about the condor vs fly comparison though, that much is definitely true from a risk perspective.
Your battery at 5% is gives me anxiety. I'm going to press the back button on my browser and do some quick de-stress breathing exercises. Brb
😂
Robinhood always assigns the puts early goodluck not getting assigned
Brokers dont do the assigning the OCC in Chicago does. These short puts have several hundred dollars of extrinsic I would be very surprised to get assigned.
I am getting slightly stressed just looking at your screen. How do you manage with just 5% battery charge remaining /s
I live life on the edge
My brain hurts from this one…
Yeah I wasnt expecting it
Hopefully you can get out of it on RH / dont getting assigned early.
I dont think early assignment should be too terrible a risk, the spread is fully collateralized with both legs of the put side deep enough ITM that if I get assigned it should be covered. The main risk I see is A) Robinhood closing the spreads early and forcing me to pay the bid/ask spread to get out before theta burns it below $5 B) Being early assigned and slippage happening between the legs when it gets closed out at that point. Early assignment SHOULD allow a big gain in theory, especially the earlier it happens, but Robinhood has a long history of handling early assignments in the absolute most asinine way possible.
If you get assigned early, you blow your whole collateral on fixing it and are left with a credit spread in which you received no credit. I also checked the same play but for June 7, and it was at a credit of 507. Didn't check other dates, but otm butterflies are rough on theta. Edit: checked the itm butterfly on 520 for June 7th, and credit was 442. I agree robinhood is your biggest risk with this.
I'm waiting to see if something happens with their usual 3:30 risk checks.
I have not been forced out of the position so far
If I'm early assigned I would be calling them at 830am begging them to just let me reenter the trade by reselling a new put credit spread, I'm hoping to avoid that and exit this in a couple months significantly before expiry while there's enough extrinsic to stave off assignment.
If you are assigned those put strikes and as far ITM as those are the delta is going to be pretty high and you are going to see some unrealized losses. If you don't close out the call side for max profit you are going to be net down, plus margin interest depending on how long you carry it.
Hopefully I would be able to reenter the put side if assigned to rehedge the call side, but you're right the slippage there is the risk.
Can you get early assignment on SPY? Thought the liquidy and mechanics of it made it almost impossible
Yes it is possible, but the risk on this is probably pretty low for at least a couple months.
And if it does happen early, you are still ahead as you have the 540P that can be sold off (along with the assigned shares) for with profit due to the extrinsic value? (Head still hurting from this one)
In theory
[удалено]
We'll see
How fast did you get filled?
It was immediate, I didn't expect it.
Usually how long does it take? Ik SPY is very liquid but 80 orders are still a lot. Sorry for the Qs but I’m kinda new to options
SPY is always pretty much instant if you bid at the ask, theres liquidity up and down the chain.
Oh. I tried selling 0DTE ICs way back on an IBKR paper account but it wasn’t really instant even with 8-10 orders at market close when markets should be more liquid (?). Another question: why do you limit your trade by covering both sides of the trade (long and short)? Wouldn’t it be more profitable to sell slightly OTM put credit spreads. Been trying that out this week with a weekly on NVDA and it seems profitable. Of course NVDA options have more expensive premiums compared to their realised move so it is more probable to make money with it.
the combination of the legs allows me to enter the position utilizing minimal buying power
By buying power you mean margin on positions right? If so you can still do that on one-directional debit spreads
I am not using margin, the spreads are collateralized with cash.
Exactly. ICs are combinations of minimum two opposite directional debit spreads = two one-directional debit spreads (?). So selling one IC or selling two one-directional debit spreads should be the same. Buying power stays the same (almost) but now you’re long one direction. Correct me if I’m wrong please
This is a short ironfly it is directional specific to a single price point which is the middle strike of 540. The credit is held as cash, and available cash on hand is set aside to cover the remainder of the width of one wing. Since these net credit greater than the width of one wing the entire trade collateralized itself with a small excess added to my existing available cash.
I would not recommend this position for a new trader.
I expected it to get rejected, honestly.
So you get max profit if price is 540 and the profit is the premium received. Profit falls off on both sides as price increases to 545 or drops to 535 and profit becomes 0 at 545 and 535 and beyond. Is that right?
Profit becomes $45. If never early assigned on this and held to expiry there would be no possible loss.
How is the profit 45? Isn’t profit the premium received? Which is around 500 bucks for each contract?
Profit is 45 at expiry if the underlying breaches either side. A gain of 45 is the maximum theoretical "loss".
As it is the price will stay within a small range near $5 for a month most likely.
Can someone explain this trade? How can this turn into profits? What are the downsides?
This profits over time the closer SPY gets to 540 and September.
The downside is the assignment risk and the need to manage and exit/reenter the trade if that happens.
It’s so annoying to read robinhood I don’t know how you people stand it.
I like the UI
Alright, now RH won't allow me to open any new positions.
how many did you open
20
They'll say you're overleveraged, youll need to either unwind the position to remove the restriction or deposit a significant amount. Or just hold for a while, which is what I'm doing.
I'll probably hold for awhile too, what's your max loss?
I don't have one
So, is there really unlimited risk? It's saying my max loss is $28
If you dont understand the risk you should exit the position.
Interestingly I was able to exit for 4.99
What was your original fill
I ended up opening 70 of these IC's across Jul - Dec. I could probably close them all now for about $4 each avg. My max fill was 5.27 , I'd sell more, but I'll wait to see how these behave for a few months. I am thinking that as SPY may approach 550 before they expire, these may actually have a good payout.
That's wild bro.
Hope your account is substantial, that's a lot of risk. Like, $37,000 in credit probably, and if assigned on all 70 thats over 3.6 million in shares.
37k is about right :)
I havent closed any of these longer dated ones yet but the lowest "medium chance" of fill I've seen so far is around 4.94
How's your position looking?
Bought to close at $4.86, opened 13 more at middle strike 550 for $5.03 in credit, closed at $4.93, and opened 25 more a couple days ago for $4.99 in credit that are sitting at $4.90 currently. This strategy actually has been incredibly profitable so far.
That's great news 👍
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What's the capital requirement for such a position? Yeah, you got filled on credit above max loss by the looks of it - 5.06 per spread, with max loss 5.00 - but what you are forgetting is opportunity cost. Depending on capital required, you'd get a better return holding treasuries, with almost zero risk (unlikely the US gov defaults by october, but I suppose it is possible at a very small chance)
There was no capital requirement. It increased my buying power.
You guys realize there's a dividend there and you're guaranteeing a loss, right?
Didnt mean to delete my comment Dividend risk is mostly an issue if the calls are ITM I believe, the puts are at risk of assignment but not the calls.
Opening these increased my buying power
I have yet to be assigned