DIA Mar Double Diagonal – Adjustments

Published on March 5, 2007

DIA Mar Double Diagonal – Adjustments

March 5, 2007

How to adjust a double diagonal. This is to update the adjustments I have made to my DIA DD income trade that I posted here.

After huge sell-off, VIX had risen and therefore my overall profit and loss curve was lifted nearly doubling my profit potential. However, at the same time, DIA also passed through my short put strike 123 and reached as low as 120.5. I decided to stay on course when it was passing through 120-123 zone as 120 was a very strong support. On March 5, as the market bounced back I decided to take advantage. DIA was roughly at my breakeven (@ expiration) point when I made the adjustments.

Here are the risk reward chart – Before and After

 orginal-dd-at-march-5-2007.png    after-adjustments-on-march-5.png

Notice how I have widened break even points and also lifted overall P/L curve. If suddenly VIX collapses then P/L will also move to zero line and I might have to adjust.

Till then profitable trading, OptionPundit 

4 Comments

  • Avatar Pablo says:

    What adjustments did you make to change the curve as you did?

  • Avatar jordanbulls says:

    yeah, same question here

  • Avatar Simon says:

    Aye Aye

  • Avatar OptionPundit says:

    I will try to explain in very simple way: Close your eyes and picturize the whole DD moving to left. Additionally I also bot insurance by buying March qtrly/April 119 put diagonal. That’s it. Hope this explains.

    Now if you would like to know the complex stuff:
    I rolled 130/132 call diagonal upwards to 126/129 call diagonal, plus bot 119 march quarterly/April put diagonal.

    Profitable trading, OptionPundit

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