I figure if you want to make it in double diagonals you should look for a ticker that is self-sustaining so you don't have to depend on the market, like BAC.
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- Thread starter AndersenBands
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I've been doing some calculating.
I reckon I shouldn't own any double diagonals that won't pay for themselves in four additional sales, which means there are maybe only fifteen or less stocks and ETFs that are worth it.
I called tastyworks and asked how assignment of a short position in the money on expiration day is handled. In a real covered call you have to give up your stock. In a poor man’s covered call you keep your long call and you are assigned short stock even if you don’t have The Works. The only loss you’d have would be your $5.00 exercise/assignment fee and any difference in price between what you agreed to sell for and what the current price of the stock is, and your long call would be making money to make up for any loss from your exercised short position. In the case of an exercised poor man’s covered put, you would be assigned long stock instead of short stock. Assignment is never satisfied with your long position and never satisfied with money unless you order each case to be handled as such.
Short stock doesn’t cost me much margin interest if I have plentiful options buying power and it doesn’t amount to much margin interest anyway if I don’t. I can hold short stock as long as I want to. What to do with short stock is I can sell a put against it and it would be assigned away without specifying what to do and I can buy stock against it and the two positions will be neutralized to nothing without specifying what to do.
Short stock doesn’t cost me much margin interest if I have plentiful options buying power and it doesn’t amount to much margin interest anyway if I don’t. I can hold short stock as long as I want to. What to do with short stock is I can sell a put against it and it would be assigned away without specifying what to do and I can buy stock against it and the two positions will be neutralized to nothing without specifying what to do.
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I called tastyworks. Short stock from an assigned poor man’s covered call can be neutralized by calling them up and exercising your long position and you will make the maximum profit that was built into your diagonal spread, as your maximum profit is made if your short position is assigned. There is to be no fear of exercise in trading poor man’s covered calls as long as you build in enough maximum profit. It would be dumb to take a loss to avoid exercise of your short call and maintain your long call when you can let your short call be assigned and then exercise your long call and make some profit and put on another poor man’s covered call. I assume you can do likewise with a poor man’s covered put and assigned long stock.
Ain't losing money, but my account ain't growing fast enough to suit me. Gotta be more aggressive selling premium. Sometimes it isn't profitable enough to restore a double diagonal after one diagonal gets exercised and I should just sell premium aggressively on the remaining diagonal. Keeping my portfolio relatively delta-neutral may be a good idea.
I figure I've got to keep a double diagonal going so both sides of the double can eventually be sold off at a profit against each other if necessary. It's just that I might have to wait to restore the missing diagonal at profitable terms. And if I have a portfolio of double diagonals, there's really nothing I can do about changing my delta, as double diagonals are naturally rather delta-neutral.
Sometimes a double diagonal is not worth restoring after an assignment and exercise, and I came up with a better way of seeing when the remaining diagonal will break even.
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I was afraid it wouldn't be practical to restore a CLF put diagonal, I had gone out to July 19 to lock in a decent profit on one, it looked like I'd have to go out to October 18 for the next one, but I got a decent deal on an April 18 today, so there's a good chance you can restore a double diagonal if you wait for a good deal, it's desirable to have double diagonals instead of single diagonals so you can sell them off against themselves at a profit in the end if you have to, you know.
I think if I want to see my account balance grow I have to get rid of red ink.
Diagonals with the LEAPS in the green in your account should have the short sales far out of the money with an adequate time payoff and a generous assignment payoff to discourage assignment to keep green LEAPS in your account. Diagonals with the LEAPS in the red in your account should have the short sales not far out of the money with a generous time payoff and an adequate assignment payoff to encourage assignment to get red LEAPS out of your account.
Diagonals with the LEAPS in the green in your account should have the short sales far out of the money with an adequate time payoff and a generous assignment payoff to discourage assignment to keep green LEAPS in your account. Diagonals with the LEAPS in the red in your account should have the short sales not far out of the money with a generous time payoff and an adequate assignment payoff to encourage assignment to get red LEAPS out of your account.