Double Diagonal Strategy: Put&call on low volatility . Too good to be true?

[OTM-Options]

I see that position as a $55.00 debit based on the bid/ask, but you might get a slightly better fill. That's a far cry from a $100 credit.

I'm confused as when I enter this position into my order it comes up as a $100 Credit to my account.

I made a mistake with my quotes - I overlooked the puts and mistook them for calls. The debit is actually $80.00

The chart below is the bid/ask for the November and December options in straddle view - calls on the left, puts on the right. The quotes to the right of the colored dots is the respective bid/ask and could be considered a realistic fill.

Selling a Call/Put @ 15/16 to expire Nov.15th = $135
Buying a Call/Put @ 15/16 to expire Dec.15th = $215
Debit = $80.00

 

[donnap]

Does this seem too good to be true?

Yeah, I don't see where the P/L calcs come from.

You're selling the Nov. guts strangle and buying the Dec. OTM strangle. You could get about a 1.00 credit at mid but volume is so low that it's likely not feasible.

The problem is that the Nov. strangle will be worth at least 1.00 at expiry. The Dec. strangle probably can't offset the Nov. strangle with a gain and it's very likely that the position will lose money.

Another problem is that the Nov. short calls will likely not survive ex-div. As long as they are a certain amount ITM - very likely at this point - you will be assigned short shares on ex-div and pay the div.

Hmm.. so how about the reverse. If you got a big move it'd be OK, but these options are too illiquid to trade and the reverse position has other problems.