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  • steve.kandalam steve.kandalam Jan 15, 2012 8:39 PM Flag

    Think we are setting up nicely

    actually you are correct about bfly you mentioned.Typically you do the trade as 1/2/1- to be balanced- ie buy 1 contract sell the 2 middle strikes and buy the higher strikes- the strikes have to be equidistant(else your margin requirements will be huge!
    Why would you sell 2 atm contracts- when you know that the stock will move 40$- the trade you proposed does not make sense!
    you have to change the strategy to fit the siuation- so a OTM butterflies are the way to go-not ATM

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