Opening (Margin): IWM May 19th/July 21st Double Diagonal
... for a 56.60 debit.
Comments: Since my previous double diagonal in IWM was such a hoot (See Post Below), re-upping here. Buying the back month 90 delta strikes (both call and put) and selling the front expiry 30 deltas, with the result being a delta neutral setup on fill.
As before, I tend to manage each side individually, so keep track of both my global cost basis, as well as side cost basis and break evens. These start out as:
Long Put Diagonal Aspect (May 19th 172 short put/July 21st 193 long put):
14.17 cost basis/178.83 break even/21 wide
Long Call Diagonal Aspect (May 19th 183 short call/July 21st 135 long call)
42.43 cost basis/177.43 break even/48 wide.
As before, I'll look to roll out the short put aspects to the shortest duration 30 delta when the short option reaches 50% max that is at or above my cost basis (in the case of the short call), at or below my cost basis (in the case of the short put), liberally taking profit on sides should that happen.
Comments: Since my previous double diagonal in IWM was such a hoot (See Post Below), re-upping here. Buying the back month 90 delta strikes (both call and put) and selling the front expiry 30 deltas, with the result being a delta neutral setup on fill.
As before, I tend to manage each side individually, so keep track of both my global cost basis, as well as side cost basis and break evens. These start out as:
Long Put Diagonal Aspect (May 19th 172 short put/July 21st 193 long put):
14.17 cost basis/178.83 break even/21 wide
Long Call Diagonal Aspect (May 19th 183 short call/July 21st 135 long call)
42.43 cost basis/177.43 break even/48 wide.
As before, I'll look to roll out the short put aspects to the shortest duration 30 delta when the short option reaches 50% max that is at or above my cost basis (in the case of the short call), at or below my cost basis (in the case of the short put), liberally taking profit on sides should that happen.
Trade active:
Rolled the 183 short call at >50% max to the shortest duration 30 delta short call at or above my cost basis, which was the May 26th 180 short call for a 1.25 credit. Long call diagonal cost basis: 41.18/176.18 break even/45 wide. Double diagonal cost basis: 55.35.
Trade active:
With the 180 short call nearly at 50% max, sticking in a good for day order to roll the May 26th 180 short call down to the June 2nd 178 for a .96 credit.
Comment:
Just a little comment on what I look at with this setup from week to week for adjustments, etc.
First, I look at whether a short option leg has reached 50% max and whether I should roll it out to reduce that side's cost basis further and improve my break evens.
Second, I look whether I can conceivably adjust a long option to take profit. Here, the 196 long put is up 14.5% and at the 97 delta strike, so I could conceivably roll that down to the 190/90 delta strike for a $234.50 realized gain and a credit of 2.65. The trade-off there is that it would narrow the diagonal from a 21 wide to an 18 wide, thus reducing its max profit potential from 21.00 to 18.00 minus my resulting cost basis for the roll which would be 14.17 - 2.65 or 11.52. In other words, it would go from 21 -14.17 or 6.83 max to 18 - 11.52 or 6.48 max, so I'd be giving a smidge of profit by money, taking, running here. I do, however, like to money, take, run, so that is something to look at.
Third, I look at whether the longs have enough extrinsic in them to potentially do nothing at all. Here, the longs are worth 59.60 (albeit with a smidge of extrinsic in them) relative to my cost basis of 54.40, so in a "both shorts expire worthless" scenario, I would still be up on the position.
In any event, with 12 DTE left in the short put aspect of the setup, I'll have to do something with that leg regardless. I like to roll these out with 7 days to go, just so I don't have to do a lot of nail biting running into opex ... . A lot will depend on what the underlying does this coming week; I'll cross that bridge when I come to it.
First, I look at whether a short option leg has reached 50% max and whether I should roll it out to reduce that side's cost basis further and improve my break evens.
Second, I look whether I can conceivably adjust a long option to take profit. Here, the 196 long put is up 14.5% and at the 97 delta strike, so I could conceivably roll that down to the 190/90 delta strike for a $234.50 realized gain and a credit of 2.65. The trade-off there is that it would narrow the diagonal from a 21 wide to an 18 wide, thus reducing its max profit potential from 21.00 to 18.00 minus my resulting cost basis for the roll which would be 14.17 - 2.65 or 11.52. In other words, it would go from 21 -14.17 or 6.83 max to 18 - 11.52 or 6.48 max, so I'd be giving a smidge of profit by money, taking, running here. I do, however, like to money, take, run, so that is something to look at.
Third, I look at whether the longs have enough extrinsic in them to potentially do nothing at all. Here, the longs are worth 59.60 (albeit with a smidge of extrinsic in them) relative to my cost basis of 54.40, so in a "both shorts expire worthless" scenario, I would still be up on the position.
In any event, with 12 DTE left in the short put aspect of the setup, I'll have to do something with that leg regardless. I like to roll these out with 7 days to go, just so I don't have to do a lot of nail biting running into opex ... . A lot will depend on what the underlying does this coming week; I'll cross that bridge when I come to it.
Trade active:
With only 8 days left in the short put leg, rolling it from the May 19th 172 to the June 9th 168 (30 delta) for a .61 credit. Put diagonal cost basis: 13.56 with a 179.44 break even on a 25 wide with a cost basis for the whole she-bang of 53.79.
Trade active:
And now rolling the call out ... from the May 19th 178C to the June 16th 178C for an .85 credit. Call side cost basis: 39.38 with a 174.38 break even on a 43 wide. Double Diagonal Cost Basis: 52.94 relative to the long strangle aspect (the long put and the long call marking at around 59.40). I don't have a particular profit target for this setup, but wouldn't mind taking 10% of my cost basis out of it (5.29/$529).
Trade active:
Rolled the June 9th 168 short put out to the 30 delta June 16th 168 short put for a .52 credit. Long put diagonal cost basis: 13.04 with a 179.96 break even on a 25 wide. 52.42 cost basis for the whole enchilada.
Trade active:
Rolled the June 16th 168 short put to the June 23rd 173 (30 delta) for a 1.19 credit. Long put diagonal cost basis: 11.85 with a 181.15 break even on a 20 wide. Global cost basis: 51.23.
Trade closed manually:
Closing here for a 53.54 credit running into the long holiday weekend. Net profit: 53.54 - 51.23 = 2.31 ($231) profit.
This turned out to be unnecessary in 20-20 hindsight due to today's price action, but I always do this on the notion that "well, you never know."