OPENING: IYR JAN 20TH 70/75/75/79 IRON FLY

... for a 2.79 credit.

Here, I'm looking to add to core exchange-traded fund fly positions in underlyings whose implied volatility is high relative to where it's been over the preceding six months (>70th percentile) There aren't many out there at the moment, and this is one of them.

Notes: Unfortunately, I forgot to write down the metrics for this fella while I was placing the trade. I'll look to manage it at 25% max, as I do with all flies and short straddles.

Comment:

Rolling the 79 long call to the 81 long call (same expiry) for a .35 ($35) credit on this up move.

Comment:

This setup is skewing out a little bit more than I'd like (net delta value of position is -66 delta or so), so I'm selling a Jan 27th 70.5/73.5 short put vert here for a .35 credit to pick up about 10 long delta. My other option was to roll the short put up toward current price, but it's currently 28 delta with a value of $80.00, so it's not quite worthless yet. This doesn't completely get the setup back to delta neutral, but I always look to "paint with small strokes" with these hedges.

Comment:

Oh, snap. Randomly assigned short stock at 70. I covered the stock for a 76.76 db at open; sold the 81 long call to close for a .16 credit; and bought to close the short put side for a .65 db. I naturally could have "re-upped" by selling another short call above current price, but decided to take the loss and just move on. I'm waiting for the assignment transaction to show up in my account so that I can calculate how big a bruise it left ... . Still got the hedge I erected, which I will pull off for scratch if I get a chance, since it no longer really is serving a purpose.

Comment:

Covered the 70.5/73.5 short put vert hedge for scratch.