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Diagonal has a narrower profit range, and your prediction must be very precise. Credit spread has a wider profit range, and so usually a lower return, and a higher probability of making a profit. Actually, you can increase your return with credit spread by using CTM options. It all comes...

I agree that the risk is high. The probability being expired worthless is around 80% using 27% vol. But I expect the vol will come down before Fed meeting. No risk, no reward. Option premium is actually risk premium. Higher risk, higher premium.

Couldn't believe the credit spread gives me such a good return (if they expire worthless)?

Open RUT 740/750 Aug call for a credit of 1.25.

Even better :)

STO RUT 740 Aug call BTO RUT 750 Aug call Net credit of 1.25 ROR = 1.25/10 = 8%

Jeff, Do you mean the margin for ES 1260/1250 spread is $400 for each contract? If so, the credit over margin ratio is 2.5*50/400 that is slightly higher than 25%. It doesn't seem span provides a higher leverage for spread traders.

You are right. The four position diagonal is pretty much delta neural, and is the best to establish when the vol is low, IMO. I will not say the vol in current environment is low. I'll wait till vix is close to 10.

The spread might not increase at sell off b/c of the effect of delta. The vega increases the spread, but delta decreases the spread. No matter what strategies (unless delta-neutral) you use, you always need to consider delta. Percy

Try the first diagonal with VLO today. STO VLO Aug 70 C BTO VLO Sep 75 C net credit = 0.05

I think you can start with FOTM credit spread like Coach. If the market sell off, do the diagonal. The diagonal can serve as a hedge for credit spread. Case 1: Market continues to drop risk management for FOTM credit spread might result in small loss, but your diagonal makes a decent...

Hi Mav, Like to meet you again in the option thread. I don't know how the span margin is calculated. It seems that it is related to the probability of the loss, but it is MTM. With haircut, it seems that it uses a fixed % (15% up and down) and calculate the max loss within that...

It depends on the future price and volatility. See my previous response to Murray. You can construct the P&L at Aug expiration.

Murray, I got your idea and I did a simulation with different volatilities. It seems to me that I can establish a better 'reversion to mean' by postponing the position. Example: 1. Wait for the panic selling. 2. When it occurs, BTO Sep 1200 Put, STO Dec 1175. This position should...

Sorry, Murray. I am confused now. I haven't short Dec put yet. When should I short Dec put, if I just made the diagonal today for a debit of $2?

If span margin is as good as hair cut, I like to stay retail by switching to future options.

Most of the prop firms there are equity only.

Today, made adjustment to existing position. BTC VLO Aug 67.5 call @1.25 STO VLO Sep 67.5 call @2.45 Initially I was trying to sell Sep 70 but didn't get a good fill, so I changed to Sep 67.5 call to get a better premium. Current position for VLO short Sep 67.5 long Dec 70 short Dec 75.

Coach, Are there any option prop firms for remote traders?

Coach, I like to increase my leverage in order to make more $ without increasing my risk. I have been increasing my risk by trading very volatile stocks to get a good premium. It drives me crazy as I have to hedge it frequently. By increasing my leverage, and trading less volatile index...