UPDATE CURRENT OPEN POSITION SUMMARY OF SPREADS: 1. SPX August Credit Spread LIMPING Iron Condor STO 300 AUG SPX 1125/1115 Put Spreads @ $0.50 Credit = $15,000 STO 150 AUG SPX 1310/1320 Put SPreads @ $0.55 Credit = $8,250 COMBINED CREDIT = $23,250 Return = ~8.4% 2. CLOSED July ES Adjusted Into Put Ratio Spread and Hedges GROSS NET CREDIT Profit = $14,375 3. ES/EW Call Ratio Diagonal Spread Long 50 ES Aug 1330 Calls @ 1.60 ($4,000) Short 45 EW Jul 1300 Calls @ 3.00 ($6,750) Net Credit = $2,750 4. ES Diagonal Put Spread Sold 20 AUG ES 1225 Puts @ 8.75 Bought 20 SEP ES 1200 Puts @ 11.00 Net Debit = 2.25 or $2,250 VIX = 14.57 [/B][/QUOTE]
Murray, I was just thinking the same. I was looking at Big Charts Vix below and noticed that between Feb and May there wasn't much vol spikes to place these back month puts or even help with the diagonals positions. You mentioned writing the naked back month DEC 1175 PUT as an example. Can you also do the same on the call side? eg. writing a back month DEC 1345 CALL ?
I think you can start with FOTM credit spread like Coach. If the market sell off, do the diagonal. The diagonal can serve as a hedge for credit spread. Case 1: Market continues to drop risk management for FOTM credit spread might result in small loss, but your diagonal makes a decent profit. Case 2: Sideway Both FOTM and Diagonal makes good profit. Case 3: Go up The diagonal will make a huge profit b/c of vega. What do you think?
You want to do a put diagonal with the VIX relatively low because your spread would increase in value as the VIX would increase (to a point). If you can do a put diagonal and the VIX continues to increase on the selloff you would come out all right as long as you picked good strikes and managed the trade well.
Thanks M! By "middle of the range" do you mean between the current price and the established short? Can the same be done with Call Diags or is that not a VEGA play?
Just a follow up Margin requirements for naked ES options. ES Sep futures ~ 1268 Sell 1 1265 AUG PUT FOP Initial margin = 4681.87 Maintenance margin = 4345.50 So if i sold 10 contracts i would need around $46818 Premium ~ 15 Sell 10 SPX 1260/1250, margin is $10,000 Premium ~ 3.25 46818/10000 *3.25 = 15.21 Roughly the same received for margin.