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Obviously you don't have to worry about earnings when trading QQQ and IWM. And if you did it on stocks before earnings, you just want to decide if you think the change in front/back month skews would be greater than the decrease in IV of the back month. Capturing this skew in the AM after...

Basically, the nice thing about the calendar is that there is no rush so I try to let it do it's thing. The straddle may actually be even more useful when the calendar doesn't go your way. "the rest of the legs" = a long straddle with the same amount of contracts as the calendar. Most of...

I usually just start out by scanning the "penny pilot list" using a skew finder. Searching through low IV breakout stocks can also be useful. On most platforms you can at least start by finding stocks with a high SV/IV ratio, and then just try to pay attention to dividend dates. It is similar...

Great points, thanks guys. I use the calendar/straddle combination much more frequently than the double diagonal ratio for similar reasons. The VXN idea is really more like an alternative adjustment to stay in the trades and lock in profit after IV did what I expected. I am less interested...

The primary difference is you are buying twice as many long contracts further out compared to what you are selling closer to the money, thus the ratio. You can produce similar results by combining say a 10 lot calendar with a 1 lot straddle, which can be a way to transfer directional risk to...

Yes, this is good for very low IV and skew situations. Thanks for the point about IV in an up market. It seems this is usually true for paper assets, but with commodities it looks like it can be a bit different. Take SCO for example. I don't ever plan to hold these through earnings, but...

I think it is an Optionetics term for the double diagonal ratio spread. They call it the Tarzan Loves Jane trade. This is the risk graph. The trade has a very high vega so it is ideal for situations when you expect a surge in IV. The whole risk graph in this picture can shift to the right...

Is it just me or does the TLJ (double diagonal ratio spread) risk graph look like a... Nevermind that. I am interested in using options to create an IV hedge for a combination of TLJ trades. Since IV is this trade's primary risk, I am hoping to use VXX or VXN to control and perhaps even...

If you entered at your maximum risk % based on your portfolio rules, then you might want to close at least part of the trade down if you aren't comfortable with taking a loss equal to the max risk. If you entered below your max risk %, then you have some wiggle room to make an adjustment...