Fx option butterfly convention

This link mentions 4 calls: I will include the standard disclaimer that I am very new to this, so please bear with me if this is very basic. However, in the broker market butterflies are actually traded as such: This is the broker strangle, as opposed to the smiled strangle which is just the arithmetic vol average of the 25d put and call.

Glossary

There are all sorts of flies The straddle - strangle thing is normally called an "iron fly" in my neck of the woods.

He's looking at it from the FX perspective, so everything traded in the broker market is a market strangle. They are always done B-S vega neutral Strangle vs Straddle so in reality there is a vega on it when considering the smile, you can do it smile vega neutral, but it's not super common. Convention on anything vega-neutral is to say of option 1 by vega equivalent of option 2.

Flies are DNS by vega equivalent of the strangle. Keep in mind when you trade a market strangle, you use a common vol to solve for the strikes you will actually trade.

As such, even if you trade a 10d butterfly, the strikes you actually trade are unlikely to actually be 10d on smile read with skew. They are quoted as Common vol strangle - DNS vol or ATMF for long dated. So if you bought USDCAD 1y 10d strangle at.

Why do you need to agree a vol? How does it impact your trade? If you bought the fly, likely what do you want the vol to be, high or low? They're all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused.

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