Coach: On your Sept. 1200/Aug1225 ES diagonal put spread. How did you arrive at your short strike of 1225. Was it based just on support levels? Since you want the index to approach your short, is there a ballpark delta your are looking for as you would for a credit spread?. Thanks for your input.
I chose the 1225 strike because of support at 1229 or so in the ES futures. I do not really need the index to approach my short strike at expiration, I would rather have it expire worthless and retain some value in the SEP long strikes. I do not select the short strikes the same for diagonals as I do for put credit spreads. For bull put spreads, I want both strikes way OTM and I do not want the index to even come close to them. For the diagonal put spread, I mainly want the short to expire worthless, or if the market is moving lower, todo so at a measured pace so I can make an adjustment. I want to have the strikes as close as I feel comfortable so that I can benefit from moves higher in IV than I would if I was way OTM.
We're in the 'waiting for another opportunity mode' right now. Two weekds ago, when the VIX dropped to 14, we placed AUG/SEPT diagonals and some 1325/1315c Credit spreads... reason for trade was seasonality and geopolitical conerns. When the VIX spiked on Tuesday... we grabbed some 1115p/1125p credit spreads to complete an Iron Condor. Be patient.... cash is a great strategy. Nothing wrong with waiting. M~
You're welcome... just note the data is always delayed by one day. It would be great if others shared some of their sites of interest.
Can someone help me out with this? I've searched and searched but can't find if/where this has been discussed before. Concerning VIX put options: shouldn't there be a floor around 10 for VIX. E.g. for option modeling, if you sold VIX puts at 15, seems like you could safely assume the lowest VIX would go would be in the 9-10 range. Unlike a stock that could go to zero. IF VIX goes to zero, that means we are all dead anyway.
Hey Leon...interesting you bring that up. When I was in Chicago for the 3 day TOS deal end of May Tom Sosnoff brought up selling the VIX puts and said it was a great trade that they had been doing all year (selling the 12.5's) making consistent money. Of course this was before June's volatility made the premiums shrink. However he said historically with the low's at 9-11 it provided a great balance in the portfolio. If the VIX does drop then all the longs in your portfolio are doing very well. He really liked the trade.
Maybe sell the VIX puts and purchase some OTM SPY calls since VIX will dip below 10 mainly on a huge surge in the market...
I just think aloud off the top of my head, you guys have to do the rest ..... Not usre how far OTM or how many SPY calls, for example, you would do v. short VIX puts.
You could also do it just in proportion to the long delta's your carrying in your portfolio...ok I'll give it a rest