about the double diags with the sag in the middle that is too deep for your liking, have you tried propping up the sag with a long butterfly? it will cost you a small debit, but it would be like a tent pole right where you need it
Opened a 2-month longterm double diagonal on RUT today. STO RUT 640 Oct Put BTO RUT 600 Dec Put STO RUT 760 Oct Call BTO RUT 800 Dec Call Net Debit = -335.2 for 5 contracts. My broker requires me the margin of both legs = 40000. Also opened a 750/760 sep call vertical for a credit of 0.8.
One of our fellow members placed a similar 2/4 month SPX double diagonal. 1225p/1250p Oct/Dec 1350c/1375c Oct /Dec He's looking to make a play on VEGA... but adding some security. At first glance, it looks pretty sound. Allows for plenty of flexibility. M~
Pretty Quiet out here today.... that's usually a custom ET signal to go SHORT the SPX. Oops... forgot, coach hasn't placed his call hedge yet. M~
I'm looking at that right now, gives a nice spike at the short stike but still gives me some negative areas. I like the idea though, need to work with it more to see what can be done with it.
I think a long calendar might be a better tentpole. Like the fly, it is still a defined risk and defined margin. It has a wider b/e and just like the diagonal's it is being paired with, it benefits from rising volatility. You can do a CTM call or put diagonal as a tentpole, but the loss from the diag is asymetrical in the direction of the spread. This drags down one side of the tent. Increasing vol helps a put diag somewhat, but a straight calendar still seems to have a better shape. Hopefully Murray will chime in, as I'm sure his group has done many more evaluations than we have. For the ToS curios, and to illustrate my point, I have attached a pdf of examples. The top chart is the basic double diagonal. Option prices are listed below. Bottom left is the calendar tentpole. Bottom right is the CTM put diag. Position sizes were adjusted to even out the profit range.