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Thanks very much for introducing me to this diagonal spread dissection methodology. I will try to gain an intuition for it.

Of course it is totally possible that my modeling code has a bug and my results are complete garbage! At least I am tracking the actual daily options prices and vol for a back check of the model.

I build my IV surface by cut and pasting option chain data into a spreadsheet. Very advanced technology. :D To simulate your case, I would have to manually tweak the data. I will try it. Is it statistically “common” for the back month vol to fall so much in a vacuum, e.g., with the front...

It loses when the move is large, up or down

no, but the trade is profitable for both an up or down move (see blue dotted lines on first graphic) of about +/- $8 on SPY.

Here's a plot of net normalized vega vs net vega. This is for the declining SPY case. norm-vega-neutral until Oct 19, then turns upward.

Awesome, thanks mucho for the homework and concrete feedback. I guess I kind of look at negative gamma as a "hedge" (Boy, did I get spanked the last time I used that word!). Imagine that the underlying is oscillating in a short-term trading range about a longer-term trend. When the underlying...

I finally got my modeling tool to a satisfactory stopping point. Using sticky delta to model the IV surface. SPY Diagonal call debit spread. S = $439.75 on Oct 11 @ 11:00 ET. long call: Dec 17 444 strike. 45 delta, IV 15.6%, $9.59 debit short call: Oct 29 439 strike. 52 delta, IV 15.3%...

Yes. This. Not that I'm complaining. This stuff is super cool. My current side-obsession. Appreciate those who take the time to transfer their knowledge.

Holy crap this stuff is complex.

Yeah, I now realize that I'm far from a "real" options trader. ;-) I went ahead and opened an Interactive Brokers account and threw a couple grand in there. I can see that it's powerful, but it'll take me a while to figure it out.

This MWM is actively seeking a SAB (single awesome brokerage): https://www.elitetrader.com/et/threads/best-broker-for-options-trading.361922/ I tell you what...having dinked around with pattern-based trading and options for about 3 years now, I don't feel very smart at all. I have devolved to...

So I took @destriero 's advice and looked at Derman's sticky delta/sticky strike work (e.g. https://www.math.columbia.edu/~smirnov/Derman.pdf) to model how IV changes when the underlying price changes. Interesting. If I understand it correctly, sticky delta assumes that IV remains linear with...

No RH pretty much sucks for options. Same with Merrill. It would be a start to see my positions and their greeks in one view. And to visualize greeks and volatility curves/surfaces

I assume this is Schwab's platform. Do the other "real" options platforms have the same walk limit order feature?

I have sold deep ITM LEAP options (eg a 95 delta call with 90 DTE) for less than intrinsic value. I don't want to repeat that mistake. It was on TLT for chrissake! Pretty darn liquid

I am sure this question has been asked and answered, but in celebration of the redundancies in life... What is the best brokerage for "real" options trading? (I'm currently in robin hood and merrill :rolleyes:, so the bar for improvement is low.)

Yeah, definitely not wedded to RH (or Merrill Edge); it's just where i started. Inertia and pain of changing is the only thing keeping me at RH. I suppose I could spring some cash free and just start an account at a different broker without moving the RH money over there.

When I said "visualize", I didn't just mean the payoff. I am also interested in visualizing the greeks & IV across strikes and over time. As well as the net greeks & IV for a multi-option position. I'm just a putz trying to wrap my head around this stuff before I really commit, but I find...

Thanks to both of you for the feedback. Nuts that you can enter such a huge position. Do you end up moving the market at that size?