(Now open to all the reader, posted originally on Feb 13) ) Here is an example of the double diagonal trade that I placed for my income portfolio.
Buy DIA April 132 Call, Buy DIA April 121 Put . Sell DIA March Quarterly 130 Call, Sell SPY Jan 123 PutFor a net price of $0.05 credit. Total margin required: $195 per spread. This is how the whole trade risk/reward curve look like. Ideally this was a great trade in my opinion as there was roughly 10% drop in VXD today so in a way I legging into this trade the midst of low volatility environment. As I had highlighted in my earlier trade note, there is volatility jump expected sometime from now till march. This trade is quite delta neutral, high probability trade that will benefit from the rise in volatility. On the worse side, this high probability trade can absorb a further absolute 4% drop in volatility i.e. from current 10% to 6%. Here is the IV Chart–
Profitable trading, OptionPundit
Disclaimer : As with other posts, this is not an advisory. These are my personal trades that I open for viewing. Please read the legal notices and disclaimer here for details.