Q: Which symbol do you use to trade the Emini’s? $SPX or SPY? Why do you pick the one you do?
A: ESU12 is emini. SPX and SPY are just the S&P. They all move together.
Q: I’m still a little confused on what it is you’re trading on the Emini’s and what to trade them on. Are you trading options on the Emini futures or just the contracts themselves? And are you just doing them on a site like TradeMonster or a different kind of company?
A: We use the actual contract. We don’t trade the options. But you can do it either way. I use Tradestation for my primary account to trade the emini’s.
Q: Have you ever been exercised on a Butterfly position (or a straddle or a strangle)? What’s to prevent one of the legs from “getting you” that way?
A: It will usually happen when almost all of the time decay is out of the option. This typically happens when you are close to expiration.
Q: I am new to trading butterflies and found that the bid and ask spread is often 50 cents or more. So when I try to place an order to open or close a position these amounts bounce around but the “mark” is usually somewhere in the middle. Yet when I tried to close a position today on the AMZN short butterfly, I found that even though I put in to buy back the butterfly at about 1.45, the mark bounced around and even briefly below that limit price, yet it still did not fill (it did this several times)… Is this common? How close to the bid and ask price do you have to set your limit price to get filled? Why does the order not fill sometimes when the “mark” price is hit or better than your limit price?
A: I usually take the mark price and go just slightly worse. Most of the time it will take several minutes to fill. This is normal. Also keep in mind the mark price is only the middle of the three legs; it doesn’t necessarily mean that is what is being traded at the time. Sometimes it gets filled instantly and I immediately start kicking myself because that means I could have gotten a better price.