TRADE IDEA: TLT AUG 18TH 125/OCT 20TH 121 PUT DIAGONAL
Here, I'm just looking to do some old school inversely correlated action in treasuries to compliment a bullish SPY diagonal I'm working separately. Ordinarily, I'd hedge a bullish SPY setup with a bearish SPY setup (e.g., an iron condor or a double diagonal) but working the call side of SPY is somewhat pesky due to skew, and I'd rather keep things somewhat simple in this low volatility stretch we're enduring here.
In this particular case, I'm looking to receive a small net credit for the setup (.08) so that I'm not starting out "in the hole" in terms of reducing cost basis in the back month long (currently worth .88).
As with all diagonals, there aren't many metrics to show, since it all depends on what happens during the life of the setup. However, here's what we do know:
Max Loss/Buying Power Effect: 3.92/contract
Theta: .63
Delta: 9.66
During the life of the setup, look to roll the short put out for additional credit. Ideally, I ordinarily do this when it has lost 50% of its value, although it can naturally also increase in value; in the latter case, I consider rolling the short put away from current price -- again for a credit, particularly since narrowing the spread will decrease setup risk. Look to exit the setup for a debit that is less than total credits received during the life of the setup.
In this particular case, I'm looking to receive a small net credit for the setup (.08) so that I'm not starting out "in the hole" in terms of reducing cost basis in the back month long (currently worth .88).
As with all diagonals, there aren't many metrics to show, since it all depends on what happens during the life of the setup. However, here's what we do know:
Max Loss/Buying Power Effect: 3.92/contract
Theta: .63
Delta: 9.66
During the life of the setup, look to roll the short put out for additional credit. Ideally, I ordinarily do this when it has lost 50% of its value, although it can naturally also increase in value; in the latter case, I consider rolling the short put away from current price -- again for a credit, particularly since narrowing the spread will decrease setup risk. Look to exit the setup for a debit that is less than total credits received during the life of the setup.
Comment:
Filled for an .08 cr.
Trade active:
Rolling the Oct 20th 121 long put to the Dec 15th 118 for an .08 credit. I don't gain much in credit for doing that, but I lock in gain experienced by the long put (>50%), as well as give myself additional time to roll/work on the short put (which I don't want to roll quite yet).
Trade active:
Finally, a day on which the short put "turned green." Rolling the Aug 18th 125 short down to the Sept 1st 124.5 for a .15 credit. Scratch at .31. I didn't get much for this besides a little more room and a bit of buying power reduction.
Trade closed manually:
Covering here for a .27 db (.04/$4) profit. 20-20 hindsight: roll the long away to book profit intraexpiry, while keeping the diagonal spread "reasonable" in width.