GLD Broken Wing Initial Entry and embedded buyback explained
January 30th, 2011
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by Owen · Filed Under: Broken Wing · Gold
Using the ETF (electronic traded fund) GLD (proxy for GOLD that trades at approximately 10% of the spot price) we are initiating a bullish biased trade into GLD using an options strategy known as a Broken Wing Butterfly.
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Owens:
If the second trade(3-3) is ‘good til canceled’, what is the first trade (6-3-6) at ‘Market’ or ?.
I noted that SorS provided a tab for ‘Butterfly’ transactions. What tab would be used for the second trade?
Lou
I never route a trade at the market. Routed this one at .67 cent limit. (.67 cents was the mid-point of the spread)
Owen,
Thanks for sharing your info.I do not have think or swim yet,so I will check it out.
If anyone asks for more tutoring from you,I would like to join you.
Please let me know when and where.
Your friend. Dave Versprille
Hi, Owen,
I love your videos. Great Job! I was wondering how you adjust the BWB if the trade moves against you and the price of the underlying stays below your lowest put strike price (in this case GLD stays under 124)?
Thanks,
Steve
Owen – is there a rule of thumb you use in terms of determining the price for buying back the embedded vertical?
In your example you routed the trade for a 0.27c debit (the mark at the time I believe was around an 0.80c debit).
Thx. for the video.
Ed
Steve,
I do not adjust these trades. I trade broken wings exactly the same as I would Iron Condors; I assume all the risk before the trade is placed. So, for example, when I place a trade, I know that it has (as example) a $400 risk. I know that no matter what happens, $400 is the most I can lose on that trade. I don’t watch it, I don’t adjust it, I just let the trade work until close to expiration. I have a certain percentage defined that I will allocate to this type of trading. If/when I reach that percentage of my portfolio, I stop adding trades.
Hope that helps.
Owen
Hi Ed,
I have chosen two amounts that I use regularly. There is no magic to this, it’s simply what I do. I like to buy back at either .23 or .27.
If I get a little more than .60 credit when I sell it, I’ll typically pay .27 to buy back the embedded. If I originally sell it for .60, then I’ll typically route my GTC at .23.
There is absolutely NO magic to those values whatsoever; except that they are inked into my trading plan.
Owen
Trade to trade well | Manage Risk First
Owen,
This is a great website and many thanks for providing this fantastic info for us newbs. I signed up on your list, but am wondering exactly what more will be provided down the road? Do you have plans to make this a subscription service or anything like that? For example, on the video on BWBs and building the positions, you give just enough “teaser” info for the novice to be dangerous, I guess. I would love to learn your strategies for building these positions, buying back the embeddeds, taking profits etc. But have no idea how and when you pulled the trigger on these trades.
Is there any way I can email you directly or will you be providing detailed examples of these strategies later?
Regards,
Everett
Hi Everett,
Thanks for the kudos, I do appreciate your comments!
I don’t have anything to offer right now beyond this site. There may be a day when I develop an instructional video set along with some PDF materials. I would love to do it, but the time commitment is pretty demanding. It will have to wait a while longer.
Did you see this particular video?
http://tradersresearchinstitute.com/blog/gld-broken-wing-initial-entry-and-embedded-buyback-explained/
Check it out and see if it answers a couple of your questions.
I’ll send you an email as well.
Make it a Great Day!
Owen
Owen,
Yes, I did watch that particular video and I understand it pretty well. I was referring more to the video I will link below, in which you had “built” a portfolio of GLD put butterfiles as the ETF moved higher. This is a VERY interesting strategy to me. I would like to get details on how one might duplicate this particular method as the underlying moves directionally.
http://tradersresearchinstitute.com/blog/broken-wing-butterfly-live-trade/
And do please email when you get a free minute.
Thanks again!
Everett