📊 Earnings Edge: Diagonal Debit Dynamics - #2 Trade in 2024
Updated
2024 Trading Challenge Entry #2: Diary of an Option Trader
💡 Trade Overview:
I noticed LLY soaring on the TradingView stock heatmap today. Observing the monthly chart of
XLE (healthcare sector), it has been mostly sideways for years. However, in the past two days, 
LLY has demonstrated strong bullish movement with increasing volume, indicating a potential uptrend. I strategized to profit from a possible breakout or continued trend within an ascending triangle pattern.
📊 Option Strategy choice:
Given the high IVR of 42 and an upcoming earnings report on February 6th before market, I anticipate further price rise. I pondered various strategies:
Noticing that IV was higher for the front-month compared to the back-month, likely due to the nearing earnings, I decided a diagonal put debit strategy was ideal to allow significant upside potential while benefiting from minor retracements as time progresses and speculating on an IVR increase.
📊 Diagonal put debit Position Legs:
Chosen structure and execution details:
Trade Details & Key Metrics:
Symbol: LLY
Date/Time: 2024-01-03 15:00
POP: 54%
Required Buying Power (Req.BP): $1090
IVR: 44
Price: buying for $0.91 debit
Front month leg: February 16 @610 x 1 PUT
Back month leg: March 15 @600 x -1 PUT
📈 My Risk Tolerance:
For the 2024 trading challenge (goal: 112K to 30k), I’m limiting floating losses to 1.5% per position, thus not tolerating more than a $175 loss. This threshold is approximately around a 590 strike price. While I’m comfortable with a considerable upside range, the upper breakeven at front month expiration is around a 711 strike, increasing to 760 at 21 DTE.
🎯 My Profit Target:
I’m aiming for about 2x the allowed loss, approximately around $300, but will consider taking profits if the price approaches the optimal equity curve point near a 650 strike. Realizing profits is always the more gratifying part of trading!
ANYWAY: HIT THE 🚀 BUTTON ABOVE!
This trade is part of my 2024 option trading challenge, where I aim to turn a 12k account above 30K 💰 (details in signature and my profile page).
💡 Trade Overview:
I noticed LLY soaring on the TradingView stock heatmap today. Observing the monthly chart of
XLE (healthcare sector), it has been mostly sideways for years. However, in the past two days, LLY has demonstrated strong bullish movement with increasing volume, indicating a potential uptrend. I strategized to profit from a possible breakout or continued trend within an ascending triangle pattern.📊 Option Strategy choice:
Given the high IVR of 42 and an upcoming earnings report on February 6th before market, I anticipate further price rise. I pondered various strategies:
- Single leg call: Not preferable due to increasing breakeven with time.
- Naked put/credit vertical spread: Not ideal close to earnings, expecting IVR increase.
- OTM calendar: Avoided due to back month’s illiquidity.
- ATM calendar: Lower upper breakeven point was a concern.
Noticing that IV was higher for the front-month compared to the back-month, likely due to the nearing earnings, I decided a diagonal put debit strategy was ideal to allow significant upside potential while benefiting from minor retracements as time progresses and speculating on an IVR increase.
📊 Diagonal put debit Position Legs:
Chosen structure and execution details:
- Buy LLY Mar 15, 2024, 600.00 PUT at 27.48 (Quantity: 1)
- Sell LLY Feb 16, 2024, 610.00 PUT at 26.57 (Quantity: 1)
Trade Details & Key Metrics:
Symbol: LLY
Date/Time: 2024-01-03 15:00
POP: 54%
Required Buying Power (Req.BP): $1090
IVR: 44
Price: buying for $0.91 debit
Front month leg: February 16 @610 x 1 PUT
Back month leg: March 15 @600 x -1 PUT
📈 My Risk Tolerance:
For the 2024 trading challenge (goal: 112K to 30k), I’m limiting floating losses to 1.5% per position, thus not tolerating more than a $175 loss. This threshold is approximately around a 590 strike price. While I’m comfortable with a considerable upside range, the upper breakeven at front month expiration is around a 711 strike, increasing to 760 at 21 DTE.
🎯 My Profit Target:
I’m aiming for about 2x the allowed loss, approximately around $300, but will consider taking profits if the price approaches the optimal equity curve point near a 650 strike. Realizing profits is always the more gratifying part of trading!
ANYWAY: HIT THE 🚀 BUTTON ABOVE!
This trade is part of my 2024 option trading challenge, where I aim to turn a 12k account above 30K 💰 (details in signature and my profile page).
Trade closed: target reached
[img][CLOSE Trade #2] January 31
💹
LLY Diagonal in $200 profit 🤑🤑🤑💰💵After 27days to open (before 16DTE) LLY diagonal put spread closed at $200 profit at 16DTE.
FOMC today is a binary event, so I'm not leaving the risk on the table!
The equity curve is at optimal point now. This is a 20% profit to my required capital, less than 1 month, I'm satisfied.
Boost up your charts with Options PRO!
REAL Options metrics for over 165+ liquid US symbols:
✔ 𝗔𝘂𝘁𝗼-𝗨𝗽𝗱𝗮𝘁𝗶𝗻𝗴 𝗚𝗘𝗫 𝗹𝗲𝘃𝗲𝗹𝘀
✔ IVRank ✔ CALL/PUT skew ✔ Volatility Skew ✔ Delta curves
👉 7-day TRIAL 🌐 TanukiTrade.com
REAL Options metrics for over 165+ liquid US symbols:
✔ 𝗔𝘂𝘁𝗼-𝗨𝗽𝗱𝗮𝘁𝗶𝗻𝗴 𝗚𝗘𝗫 𝗹𝗲𝘃𝗲𝗹𝘀
✔ IVRank ✔ CALL/PUT skew ✔ Volatility Skew ✔ Delta curves
👉 7-day TRIAL 🌐 TanukiTrade.com
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.