NaughtyPines

OPENING: EEM FEB/APRIL 36/41/41/46 DOUBLE DIAGONAL

AMEX:EEM   ISHARES TRUST MSCI EMERGING MARKETS FUND
... for a 1.22/contract credit.

Doing a smidge of defined risk, all-weather, broad market instrumentation here ... .

The metrics aren't much to look at, because they aren't static,* but here they are:

Max Loss/Buying Power Effect on Setup: $378/contract
Max Profit on Setup: $122
Delta: 3.48
Theta: 1.9

As far as intratrade management is concerned: Look to roll out the short straddle aspect on decrease in value/realized gain for a credit to at-the-money. Since the short straddle aspect is worth only 1.80 here, you're probably going to want to wait until something approaching 25% max (i.e., .45) before burning a roll. As far as the long strangle aspect is concerned, my tendency is to largely leave it alone unless the short straddle has moved significantly to one side or the other, at which time I generally look at recentering the long strangle via rolling.

Look to take profit at 25% of what you'd get were this a static iron fly with risk one to make one metrics (in this case, it's a 5-wide with a risk one to make one setup paying 2.50 with a 25% max of .63 or so) and then reset the setup anew.

* -- The overall risk of the trade can potentially diminish over time on roll of the short straddle body for additional credits and/or adjustments of the long strangle aspect to maintain max loss potential (the difference between the width of the spread and total credits received).
Trade active: As with my XOP double diagonal, rolling out to March for a realized gain and an .83/contract credit as price traverses the short straddle aspect of the setup. Scratch at 2.05.
Trade active: Rolling out the March 41 short straddle at 10% max to the April 42 for a .58/contract credit; scratch at 2.63/contract.
Trade active: And now recentering my side risk by rolling the long strangle intraexpiry from the 36/46 to the 37/47 for a .04/contract credit so that each side is a five-wide (it also frees up 1.00 in BP/contract since the widest side goes from a 6-wide to a 5-wide).
Trade closed manually: On second thought ... . Covering here in advance of the March 1st deadline for US-Chinese trade talks for a 2.53/contract credit, so it's all but a scratch. There are Chinese underlyings in the ETF, and I'd rather not have it take off like a rocket or drop like a rock while I'm in the trade. Will look to re-up post March 1st ... .
Closed this one on the 8th (2-8) for small profit, wanted the capitol elsewhere and never hurts to take the risk off. Thanks again!
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NaughtyPines Tom1trader
@Tom1trader, Cool beans. 20-20 hindsight, I probably could have waited a bit longer since it's now chopping around that 42 handle, but would rather get into something with a bit more juice in it. 30-day's now dropped below 19, at the low end of its 52-week range.
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Followed you on this, initial cr 1.21 and looked like might pull back so waited even though well over half extrinsic gone. Moved shorts to march and up a dollar just now and saw center of long april strangle fill for .01 cr scratch now 1.88 mark 1.83. Thanks for the lead!
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NaughtyPines Tom1trader
@Tom1trader, Awesome. It's been chopping around between 38 and 43 for a while, but showing a little strength here ... .
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Tom1trader NaughtyPines
@NaughtyPines, As if the next bar/candle pays the least attention to these things looks like EEM is turning back down - good! https://www.tradingview.com/chart/OsBXckpZ/
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NaughtyPines Tom1trader
@Tom1trader, Was flirting with the upside break even of the short straddle aspect of my setup. Waiting to roll out to April for a realized gain at some point (fingers crossed) ... .
Reply
Tom1trader NaughtyPines
@NaughtyPines, Rather than 20 the Bollinger / Keltner basis is 13 default on that indic, the green MA. anyhow even though it might be a turn down it could also just be a pull back as that 13 ma has been acting as support about where it is now. BE roughly 44 you opened with more credit bit higher I suppose although I do not calculate it very close and go with a more conservative number so get notified before it moves all the way to BE. Same on fingers crossed. :-)
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