Can be said of any strategy if your criteria is perfect strike selection. I am referring to the convex PnL indicative of its delta and gamma position. The fact remains that that position earns best at the strikes, which were 30+ handles otm.
There is no simple strategy for long dgamma and short gamma, but a complex combo might do?! I can also short gamma and take the gamma risk for a short period of time, and establish long dgamma when certain risk level is reached. Gamma doesn't increase much in the beginning, and if you can establish long dgamma before close to expiration, you have reduced your risk significantly. Is that true? I appreciate your comments as usual before I risk my real money.
True, but I am working on stretching a few strikes across the current range of prices and having several strikes where the profit maxes out. It lifts the middle p/l chart and has a few tent poles for profit. I am still testing it out but it looks similar to a double diagonal P/L chart but mroe stretched across. We will see how my testing and modeling goes. I need to wait until Monday when the OCT expires so I can use the next months in the SPX and certain stocks.
Debits still go against my religion but if I can cmobine other adjustments it may be worthwhile, especially since it is Vega+....
Debits are not mandatory. Doesn't anyone, besides me, use wider strikes and collect credits for diagonals? Mark
I have shorted 3 contracts of rut 760 put, and 8 contracts rut 760 calls from my DDs. Any suggestions to hedge against the set risk?
Wider strikes have their cons in that the long is too far OTM to provide delta help if the short strike is slightly ITM. I was not happy with my 25 point wide call diagonal in how it reacted to the market move higher. The long strike hardly budged initially while the sort strike caused the net cost to jump. I will experiment with both since credits is more up my alley lol. Mark, let me know what strikes you are looking at so I can follow along.... I am sure I will try it again under the right circumstances but a debit is fine if the postion has a good chance at profit on a move to the short strike or IV increase. we will see...
Mark, I do. I usually use both narrow strikes and wide strikes to balance it out to avoid the debits.