Basic Vertical question

[ClaytonNive]

Hi Guys !!
Why is(would be) a bad idea?

Risking $90 to make $410 is too good to be true!

Thanks !

[CixPeelve]

The bid/ask spread is waaaay to big in here. Just not enough volume to be an efficient market. When you have inefficiencies like this the probabilities are less efficient and the options are not priced efficiently. Not saying you can't or won't make money on this particular trade....just saying that doing illiquid trades will cost you a lot more than you think over time. There are plenty of trades with the same payouts that are much more efficiently priced. No reason to take this one and give up edge when you can do the same thing in something that gives you the edge you are playing for.

[Cliftonnole]

Thanks ! As always !
I cannot seem to find anything with a higher payout than $2.10 with these setting in tastytrade stocks. What would you suggest I tweak (if any)? And (for some reason) I want to stay away from Call spreads.
Also, what other stocks should I look into other than tastytrade and S&P 500, and what would be the drawbacks?
Thanks!

[cnijbtwl14]

For example....WFM has some good volatility....the bid/ask at the money is only .02 wide. So maybe you think it might go up some more from being beat down...... you could buy a 4-5 dollar out of the money 4$ wide call butterfly for July for around .13 with max profit of 1.87. If you plan on selling it back at anywhere near 50% max profit you greatly increase the probability of making money. Now you have good pot odds and the market is priced very efficiently. For not much money you have a nice little lottery ticket that stands to pay better than the options probabilities are priced. With higher volatility butterflies are much cheaper so makes it easier to widen the strikes.

Setup =
Buy 1 call at 43
Sell 2 calls at 45
Buy 1 call at 47
For july
Cost is 13$ for each butterfly....so that's all you can lose for each one you want to do. Example--- Do it 3 times and max loss is 39$ and max profit is 561$. There are no upcoming earnings or dividends by expiration. Cashing out at 30% max profit would increase your probabilities drastically and still be a really nice return on capital.

[Concordhok]

I haven't even started with Vertical, you will kill me with a butterfly http://onlinetradersforum.com/styles/default/xenforo/clear.png