How Not To Trade A Broken Wing Butterfly.
on 5/07/2013 we enter a BWB on AGQ (2 Week Play) Click Image for Zoom View
AGQ is a ProShares 3x leverage Silver ETF
Our entry is about where the line is marking the chart, its a slightly bearish BWB.
our center strike, and trade target is the 23 strike, We Entered on 05/07 on 5/15 8 days later we are exactly at the center strike, so we pull up the analyze tab to see how much this thing has made, and much to our dismay .
We have been in the BWB Fly for 8 days we are at the center strike, the bwb is at the exact same price. So if we can just hold this it might open up well .
FAST FORWARD TO TODAY THE FINAL DAY OF EXPIRATION
We Float right past 23 but the fly is slowly opening up, I never Ever hold things this long- one leg of the fly is ZERO bid, so I am going to ignore that and work a ratio spread to get out of this.
Mid Day we are looking like this ...note the center line in the bottom the position is up about $950.00
I start to say to myself this is what a unicorn looks like and they do exist, we can Pin 23 and we will have made a square circle, high fives all around the office. ......
and then we start to slide.... I rapidly become uncomfortable with the dollar extra of risk the bwb has, So in good practice I spend 4 cents and by a protective leg turning the BWB into a Straight Fly.
(Highlighted Leg Bot, Turning BWB into Straight Fly- Offering outside Leg in off chance)
This gave us a little too much overconfidence, As it let us mentally press things till the end...
and things started sliding more and more. we go through 22.70s, 22.60s, 22.50s 22.40s, 22.30s
I am starting to think the whole thing might get blown out or we can bounce, I closed the long spread vertical of the fly for .98 cents the max it could go to was 1.00
Now I am watching the center strike, Where the market is 70 x 85
I go to .75 Bid and the market goes to .75 X 95 almost instantly.
and we are starting to run out of time, there is less then 5 minutes left in the day at this point,
I am trying to penny the Middle, and With Three minutes left to close Fill .90s while the market is 75x95 and I am the last volume in there for the day .
all Said and done I lost one CENT.
