thanks Murray...both responses are very helpful
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Ryan,
What is nice about the double diagonal... is you have choices. Unlike the front month credit spreads.... you're in or you're out. An adjustment in the Credit Spreads usually constitutes a closing of a position and an opening of a new position. And when you make this adjustment... there has been plenty of emotional distress leading up to the decision, even if you have a plan. We've all been there....
The double diagonal, on the other hand, profits from this distress. The position loves increased volatility, which is usually the case at OTM short positions on Credit spreads or Iron Condors.
Depending how close to the short strike the position closes.... the more choices you have. Consider the market moving up from here to say 1325 by next expiration. You take in your full credit from April, and have a May 1350c with positive dollar value in it. You could sell against that and create a credit spread, you could buy a put and leverage into a inexpensive strangle, you could sell the May 1370 and get into a Bull Call for free... the posibilities are endless.
Also... because of the volatility skew in the PUT side... there will be some $$ left in the May 1190p. Not much... but... it's like insurance.... you still have four weeks of time left in the position. You could sell against it and be in a credit spread, buy it back and take the value for profit, roll it up, etc.
We can't wait for the market to head south someday.... $$$, even a 'black swan event' thanks to volatility. Here is where the condor punishes you and double diagonal rewards you. Just this scenario alone is reason enough to consider the diagonal.
As far as adjustments, what we're doing at this point, is just repositioning the entire trade into the next month. As our learing curve increases, we'll look at alternative adjstments. Once again... I'm not seeing much, if any, need to make an adjustment while in these ratioed positions.
Murray
What is nice about the double diagonal... is you have choices. Unlike the front month credit spreads.... you're in or you're out. An adjustment in the Credit Spreads usually constitutes a closing of a position and an opening of a new position. And when you make this adjustment... there has been plenty of emotional distress leading up to the decision, even if you have a plan. We've all been there....
The double diagonal, on the other hand, profits from this distress. The position loves increased volatility, which is usually the case at OTM short positions on Credit spreads or Iron Condors.
Depending how close to the short strike the position closes.... the more choices you have. Consider the market moving up from here to say 1325 by next expiration. You take in your full credit from April, and have a May 1350c with positive dollar value in it. You could sell against that and create a credit spread, you could buy a put and leverage into a inexpensive strangle, you could sell the May 1370 and get into a Bull Call for free... the posibilities are endless.
Also... because of the volatility skew in the PUT side... there will be some $$ left in the May 1190p. Not much... but... it's like insurance.... you still have four weeks of time left in the position. You could sell against it and be in a credit spread, buy it back and take the value for profit, roll it up, etc.
We can't wait for the market to head south someday.... $$$, even a 'black swan event' thanks to volatility. Here is where the condor punishes you and double diagonal rewards you. Just this scenario alone is reason enough to consider the diagonal.
As far as adjustments, what we're doing at this point, is just repositioning the entire trade into the next month. As our learing curve increases, we'll look at alternative adjstments. Once again... I'm not seeing much, if any, need to make an adjustment while in these ratioed positions.
Murray
We're not considering a 1:1 ratio at this time.... it introduces RISK. Although... not nearly as much as if you were into a credit spread. Remember, as the market moves toward your short (risk area), the next month out long is making money and taking in possible volatility.
We really concentrate and focus on Risk Managment.... and the ratioed positions help offset the risk.
Murray
QUOTE]Quote from chrdso:
Murray,
If you were doing a 1:1 double diagonal and the market is near your short strike:
1) When would you adjust (at short, between short and break even? ....?)
2) How would you adjust? (roll short to create a calender? double calender? ......?)
Thanks [/QUOTE]
We really concentrate and focus on Risk Managment.... and the ratioed positions help offset the risk.
Murray
QUOTE]Quote from chrdso:
Murray,
If you were doing a 1:1 double diagonal and the market is near your short strike:
1) When would you adjust (at short, between short and break even? ....?)
2) How would you adjust? (roll short to create a calender? double calender? ......?)
Thanks [/QUOTE]
hey murray. How about a new DD thread. I agree that there are many more options(adjustments) than IC and r/r is MUCH better as well. Ill contribute to it, I use DD's on equities.
Well today is a very interesting day. Back to back positive news has sent the market out of a consolidated traingle which now appears to be a long pause from the Oct surge. The true test whether this breakout has any legs will be if the 1295/1297 support/former resistance holds on a pullback.
Looking forward let me caution you on call spreads since we are in new 5 year high territory and overhead resistance is hard to peg. I do not have any April positions yet and looking to add calls only at 1370 if I can since I really do not want to get close if SPX stays above 1300. If that line holds, then, contra to most people expectations, the market may continue its bullish push.
Select call strikes with caution...
Looking forward let me caution you on call spreads since we are in new 5 year high territory and overhead resistance is hard to peg. I do not have any April positions yet and looking to add calls only at 1370 if I can since I really do not want to get close if SPX stays above 1300. If that line holds, then, contra to most people expectations, the market may continue its bullish push.
Select call strikes with caution...
Hey,
I just came back from my 10K (Boulder Trail running) and what I found is really stunning.
I have been nursing a 590/595 OEX for the last 3 days now. Yesterday I was supposed to close it but didn't. I laso have a 595/600 calls in another account that I am watching too.
So this morning I needed margin release in case I need to close my 590/595; So I close SPX 1330/1340 for 0.05 and I close OEX 575/570 @0.05
SPX 12 1330/1340C in for 0.65 credit out for 0.05
OEX 17 575/570P in for 0.60 credit out for 0.05
And then I decided to close only one branch of the OEX 590/595C because I also have 595/600.
I had 10 590/595 @ 1.05 credit; Close 590 Short @ 1.90
Now the 595 Long is worth 0.75. I could be down a lot but I am loosing only 0.15 so far in this trade.
I want to keep it until Friday because I have:
12 OEX 595/600 I am still watching. But by the time OEX touches my short 595, my Long 595 will probably be worth 2$.
This may not be a bad month after all for me.
I expect the market to go up until St Patrick but I will load my truck by Friday because look out below next week. This market is going to roll over.
MHO
I just came back from my 10K (Boulder Trail running) and what I found is really stunning.
I have been nursing a 590/595 OEX for the last 3 days now. Yesterday I was supposed to close it but didn't. I laso have a 595/600 calls in another account that I am watching too.
So this morning I needed margin release in case I need to close my 590/595; So I close SPX 1330/1340 for 0.05 and I close OEX 575/570 @0.05
SPX 12 1330/1340C in for 0.65 credit out for 0.05
OEX 17 575/570P in for 0.60 credit out for 0.05
And then I decided to close only one branch of the OEX 590/595C because I also have 595/600.
I had 10 590/595 @ 1.05 credit; Close 590 Short @ 1.90
Now the 595 Long is worth 0.75. I could be down a lot but I am loosing only 0.15 so far in this trade.
I want to keep it until Friday because I have:
12 OEX 595/600 I am still watching. But by the time OEX touches my short 595, my Long 595 will probably be worth 2$.
This may not be a bad month after all for me.
I expect the market to go up until St Patrick but I will load my truck by Friday because look out below next week. This market is going to roll over.
MHO
New Thread?
I would prefer to stay on this thread.... because it may lead to interesting discussion as we compare the credit spreads against double diagonals..... especially towards expiration. In essence, they still can be placed as credit spreads.... but they're an entirely different beast.
I would be interested in hearing your thoughts on DD's. I've only been trading them this year.
Murray
I would prefer to stay on this thread.... because it may lead to interesting discussion as we compare the credit spreads against double diagonals..... especially towards expiration. In essence, they still can be placed as credit spreads.... but they're an entirely different beast.
I would be interested in hearing your thoughts on DD's. I've only been trading them this year.
Murray