OPENING: XOP JUNE 15TH 31 LONG/MARCH 29TH 34 SHORT PUT DIAGONAL
Обновлено
... for a .15/contract credit.
As with any diagonal, there aren't many metrics to provide, since max profit is dependent on the number of rolls undertaken, the credit received for each, as well as whether the long maintains value. However, the max loss is the width of the spread (3) minus the credit received for the setup (.15) or 2.85. This is the max I can lose if I do nothing, and the setup goes to max loss. Similarly, my max profit is a whopping .11 ($11)/contract if price rips totally away from the setup, the long and short go to worthless, and I don't roll the short to take in more credit.
The particular thing I like about these setups is flexibility and the number of ways in which they can be worked intratrade:
(1) Allow the short put to go to at or near worthless (.05 or less), and then sell the long for a credit if it has held value in excess of the credit you received to put the trade on. The difference between the credit received for selling the long minus the credit you received to put the trade on is your profit (minus fees and any debit you paid to close the shortie).
(2) Work both ends of the candle. Roll the long down on significant increase in value to lock in gains and roll the short put down when you're able to do so for a credit. Alternatively, roll the short put out for duration and credit on significant decrease in value, leaving the long in place. Cover the setup for a debit that is less than total credits received. The difference between total credits received and the debit you paid to exit is your profit.
Keep in mind that if you burn both sides of the candle, you'll be widening the spread and therefore increasing buying power effect and max loss.
(3) Work the short put only. Roll the short out "as is" on significant decrease in value (I ordinarily do this at 50% max) and exit the trade when rolling is no longer productive (usually when price has ripped away from the setup). If price breaks the shortie, allow as much extrinsic to bleed out of the contract as you can, and then roll for a credit while examining whether you can strike improve on roll.
This is the generally accepted approach to these setups. The width of the spread (and therefore the buying power effect) remains constant throughout the process or decreases if you're able to roll the shortie down for strike improvement and a credit (decreasing the width of the spread and therefore max loss).
And we'll see how it goes ... .
As with any diagonal, there aren't many metrics to provide, since max profit is dependent on the number of rolls undertaken, the credit received for each, as well as whether the long maintains value. However, the max loss is the width of the spread (3) minus the credit received for the setup (.15) or 2.85. This is the max I can lose if I do nothing, and the setup goes to max loss. Similarly, my max profit is a whopping .11 ($11)/contract if price rips totally away from the setup, the long and short go to worthless, and I don't roll the short to take in more credit.
The particular thing I like about these setups is flexibility and the number of ways in which they can be worked intratrade:
(1) Allow the short put to go to at or near worthless (.05 or less), and then sell the long for a credit if it has held value in excess of the credit you received to put the trade on. The difference between the credit received for selling the long minus the credit you received to put the trade on is your profit (minus fees and any debit you paid to close the shortie).
(2) Work both ends of the candle. Roll the long down on significant increase in value to lock in gains and roll the short put down when you're able to do so for a credit. Alternatively, roll the short put out for duration and credit on significant decrease in value, leaving the long in place. Cover the setup for a debit that is less than total credits received. The difference between total credits received and the debit you paid to exit is your profit.
Keep in mind that if you burn both sides of the candle, you'll be widening the spread and therefore increasing buying power effect and max loss.
(3) Work the short put only. Roll the short out "as is" on significant decrease in value (I ordinarily do this at 50% max) and exit the trade when rolling is no longer productive (usually when price has ripped away from the setup). If price breaks the shortie, allow as much extrinsic to bleed out of the contract as you can, and then roll for a credit while examining whether you can strike improve on roll.
This is the generally accepted approach to these setups. The width of the spread (and therefore the buying power effect) remains constant throughout the process or decreases if you're able to roll the shortie down for strike improvement and a credit (decreasing the width of the spread and therefore max loss).
And we'll see how it goes ... .
Сделка активна
Just to stick a GTC order out there in case I overlook the trade for some reason, I'm looking to close for a .55/contract credit. This assumes that the shortie goes to worthless and that the long has maintained at least 50% its value when occurs. The profit would be .55 - .15 or .40 ($40)/contract in that event.Сделка закрыта вручную
Covering here for a .02 credit, resulting in a small .17 winner. Reupping with a call diagonal ... .
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