OPENING: EEM FEB/APRIL 36/41/41/46 DOUBLE DIAGONAL
Updated
... 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).
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 ... .
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