Today, Tom and Tony talk about how a small account can utilize BPR (capital) effectively.
By comparing straddles to iron flys, we can look at the differences in BPR, return on capital and win rate, and see which strategy is more viable for a smaller account.
The difference between an iron fly and a straddle is that the iron fly includes 10 delta long options on both sides of the original straddle. Example: Sell 245 strike call and put and buy a 10 delta call and a 10 delta put.
We conclude that the iron fly has a slightly lower win rate than the straddle. However, smaller accounts can utilize the iron fly for its superior ROC, and reduced BPR which allows for more occurences and consistent results over the long term.