Hi, does anybody have experience trading long box spreads as a diagonal using ATM long call & put over 1 year to manage theta while rolling shorts? I understand vega is the risk. Assuming VI is at or below historical is this a viable approach to generating income systematically? Thinking of closing the long straddle 6 months from expiration and resetting the position. Thank you for the feedback.
Long Positions IWM Mar 17 2017 109.00 Call @ $7.63 IWM Mar 17 2017 109.00 Put @ $9.12 Short Positions IWM Apr 22 2016 110.00 Cal @ $1.52 Iwm Apr 22 2016 108.50 Put @ $1.97 Intent is to roll the short positions as close to expiration as feasible and close the whole position when the Long contracts are 6 month from expiration. Thank you
In all honesty I have no idea what kind of position you are describing there (an example could be useful). However even without knowing the details of it I can tell you this with certainty: There is no such thing as systematic "income" generation from options, period. If you want to make money, you need to risk money. Risk-less profit is beyond the capabilities of retail traders (no matter the instrument).
I understand, the position is combining a leveraged covered call with a leveraged covered put using ATM strike price for the stock replacement and taking advantage of offsetting positions to preserve capital.
Thanks for the example, the position is a variation on a Strangle Swap, you are swapping a short near term strangle for a long far term one (ok in this case is a straddle). I do strangle swaps from time to time. In particular if near term Implied volatility is very high compared with the back months (I play a few earnings reports that way). But this is not a systematic approach and certainly not one you want to use for index options.
The short trade conflicts with the long trade. I wouldn't open the long trade until the short trade is closed.
Call it what you want but the short position is neutral and the long position very bullish. Having them both opened at the same time makes no sense.