From Theory To Practice - March 5, 2021 - The Friction of Iron Flys
Any four-legged strategy, such as an Iron Condor, Butterfly, or Iron Fly, is going to have a lot of friction between the long options and the short options. This friction can be caused by either the spread width or the strike distance. As a result, we typically manage these strategies more aggressively at 10-25% of max profit.
In addition, when it comes to defending a position through adjustments, we’re not as quick to move into the Iron Fly, as it can potentially have the most amount of friction. We see this exact scenario with our $10 Wide Iron Condor in BIDU.