IWM Dec DD/ 21.25%
1Jan2007 Filed under: Double Diagonal Author: OptionPunditAs I had mentioned earlier in one of the post that December is tough month for market neutral traders. I played a double diagonal IWM on December quarterly. It paid-off very nicely giving me 21.2% in about 5wks holding period. The original trade was opened for $0.20 credit/dd. Margin required/dd was $180 ($200-$20).
Both short options 81 call and 76 put expired worthless yielding addition $0.225/dd premium. Overall returns are $42.5/DD i.e. 21.25%.
I still have both long options i.e. 83 call and 74 puts which I shall sell asap.
5 Responses to “IWM Dec DD/ 21.25%”
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Been There, Done That
optionpundit
January 8th, 2007 at 9:43 am
I sold 74 PUT for $0.10/leg.
Cobber
January 12th, 2007 at 8:42 am
I like your style of trading and your blog!
What was the reason you put the IWM DD on for a 0.2 credit? You probably could have out it on for a debit and stretched the breakevens wider. Any reason in particular?
DD are one of my favourite trades. Do you ever adjust these. I havent seen any posted where it has gone wrong and you have needed to adjust?
Regards
Cobber
optionpundit
January 13th, 2007 at 9:42 am
Thanks for the complements Cobber. I generally like to place DD for $0.25 either debit or credit. The more the credit or debit, the risk to reward isn’t great. I took credit as I was comfortable with the range for the short strikes (it was driven by technical charts and a bit feeling where RUT might end up in Dec.
Cobber
January 15th, 2007 at 3:22 am
Thanks OptionPundit - Do you ever adjust any of these trades. Ive noticed I havent seen any adjustments in your DD or IC trades?
Cobber
optionpundit
January 15th, 2007 at 4:49 am
Yes Cobber, I do adjust.
However, fortunately, if you review my RUT Iron condors as well DD in the past few months, there was no need to adjust any of those. And since I started my blog only a few months back, there are no posting on adjustments.