Best Option Spread Strategy

Here is an idea for all you Iron Condor guys..how about starting with Double Diagonals first?

Say you are looking at XYZ stock and are thinking it will stay in it's current channel for a while. So you plan on selling a MAY IC on it. Instead use a DBL DIAG. Buy the May longs just like you would for the IC but instead of Shorting the May Contracts, short the same strikes in April.

Why?

The April shorts will lose time value faster than the May shorts will. So you let them deteriorate and then buy them back close to exp and then short the May options at the same strike. This effectively allows you to get two months worth of shorts hedged with the same longs.

Of course we are getting close enough to the April Exp now that you might look at using the May/June contracts instead. Oh and beware of earnings, it can be the bane of a good IC or DBL.
 
Quote from Maverickz:

Here is an idea for all you Iron Condor guys..how about starting with Double Diagonals first?

Say you are looking at XYZ stock and are thinking it will stay in it's current channel for a while. So you plan on selling a MAY IC on it. Instead use a DBL DIAG. Buy the May longs just like you would for the IC but instead of Shorting the May Contracts, short the same strikes in April.
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Good thinking... if you place your IC positions that far in advance. I look to place mine about 30-45 days before expiry, so in some cases, this will indeed leave an (albeit small) opportunity in the earlier month. But hey, why not!
 
Quote from quazimofo:

Good thinking... if you place your IC positions that far in advance. I look to place mine about 30-45 days before expiry, so in some cases, this will indeed leave an (albeit small) opportunity in the earlier month. But hey, why not!
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Even if you were planning on Selling the April IC, a DBL still makes more sense. You short the Aprils just like you planned but you buy the May's instead of April's. Just due to time decay when it comes time to exit the trade the shorts you have to buy back will get cheaper faster than the longs you have to sell. And you still have the option to roll into a May IC if it still makes sense.
 
Quote from Maverickz:

Even if you were planning on Selling the April IC, a DBL still makes more sense. You short the Aprils just like you planned but you buy the May's instead of April's. Just due to time decay when it comes time to exit the trade the shorts you have to buy back will get cheaper faster than the longs you have to sell. And you still have the option to roll into a May IC if it still makes sense.
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Completely agree. The only thing for me is that in order to maximize the R/R, I need to focus on the strike selection and not let the Double Diagonal play affect their selection. Once that is done, this play is icing on the proverbial cake!
 
I get a bit leery when someone posts a link of something "free and helpful" and when I click it, I am expected to "sign up". So how much does it cost and how much spam will I be receiving?
 
Quote from Maverickz:

I get a bit leery when someone posts a link of something "free and helpful" and when I click it, I am expected to "sign up". So how much does it cost and how much spam will I be receiving?
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Mavz,

The link is of the CBOE which I am surprsised you are doubting. Of course, if you are uncomfortable, there is no need to sign up. Signing up at CBOE is definteluy free, and I am sure others will attest that what they are offering as webinars is definitely useful. I do not have any personal interest for the link, but I saw something useful which I wanted to share.

Sometimes, we just need to come out of the mentality that anything you sign up costs you, and/or it is always spam. This forum is an example in itself.
 
Quote from thinkplus:

Mavz,

The link is of the CBOE which I am surprsised you are doubting. Of course, if you are uncomfortable, there is no need to sign up. Signing up at CBOE is definteluy free, and I am sure others will attest that what they are offering as webinars is definitely useful.

Sometimes, we just need to come out of the mentality that anything you signup costs you, and/or it is always spam. This forum is an example in itself.
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Forums are usually free. Training, including web based usually isn't. Which is why I asked.

Oh and just curious are you affiliated with Think or Swim? I only ask based on your handle.
 
Quote from Maverickz:

Forums are usually free. Training, including web based usually isn't. Which is why I asked.
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The keyword is "usually", and that's exactly my reason to post the link.

Personally, I have not seen a trader with 10-20 years of experience talking to us for free, and actually going through the steps of the strategy. Very insightful. There are various types of webinars at CBOE from different people talking about various types of trades - e.g. the recent one on hedging the portfolio (I think by Steve L) was good for me to learn how to hedge long term portfolios such as 401(k), IRAs.

There are many webinars on spread strategies (the topic we are discussing here on this thread), and not only on how to put them, but how to manage them. Risk management is the most omitted part even in most of the books, and real helpful to any trader. We make 10 risking 100. The going might be good for 9-10 months, and when the market strikes, the 11th month will wipe out all the earnings from those months if we do not have a plan to manage that risk. There are various techniques I learned from those webinars. Most of the times we do not know this, and we need to learn from mistakes. Well, here are some insights from some experienced traders.
 
Quote from Maverickz:

just curious are you affiliated with Think or Swim? I only ask based on your handle.
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No affiliation with TOS whatsoever. or for that matter, not with any other trading firm, or a person.

Good observation, and thanks for asking. Helps me steer clear of allegations for the recommendations/sites I post.

I am an avid reader, and internet has opened up a window of opportunity. So, if I come across something good, just try to share it.
 
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