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Diagonal Spreads - Discussion, Q&A, etc |
SwingTrader
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Post: #181  Posted: Fri Mar 28, 2014 9:25 am Post subject: |
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| dine wrote: | And one more pls, in continuation to my previous post.
Had I taken a long trade on 6-Mar-2014 @6430, the better spread is 6200CE APR, 6400CE MAR with a hedge pct of nearly 30. And If i decide to carry forward the trade to next month, what would be the better option.
1. Roll over short position in 6400CE MAR to 6400CE APR ? Or wind up the spread and take a fresh position tomorrow (new series start). ie.. find the diagonal spread again using same rules with tomorrow's price ?
As this is a fresh month , would it be wiser to take a fresh diagonal position as opposed to converting the current position to a vertical spread ? Please advice.
Thanks,
Dinesh S. |
I think converting to a vertical spread is easy and a better idea. Also, in the current case you don't want to initiate a Long May - Short Apr diagonal as May volatilities are very pricey due to elections. So best to stick to an April vertical for now.
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Srikanth Kurdukar
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dine
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| Post: #182 Posted: Sat Mar 29, 2014 4:09 pm Post subject: |
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| Yeah that makes sense.. Thanks a lot ST |
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paa
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| Post: #183 Posted: Thu May 08, 2014 12:43 pm Post subject: |
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ST Sir
Can you please suggest any diagonal for long?
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paa
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| Post: #184 Posted: Thu May 08, 2014 3:23 pm Post subject: |
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Please also suggest if someone want to go short?
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chiragbvyas
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| Post: #185 Posted: Fri May 09, 2014 10:19 am Post subject: |
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| paa wrote: | Please also suggest if someone want to go short?
Regards |
Did you find anything tradable pair ? |
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SwingTrader
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| Post: #186 Posted: Sun May 11, 2014 8:34 am Post subject: |
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I am staying out of spreads until the election results event is over. Options are not priced well and there is a high probability of volatility changing suddenly after the event that can affect the profitability of spreads. So it would be best to wait until the event is over to take options positions.
Now, if you still insist on taking a position. Trading a diagonal spread at this point is actually okay. We go long the Jun and short may options. May options implied volatilities are significantly higher than Jun options which is just fine for us. A 6700-6900 or 6800-7000 call diagonal spread should be fine. You will observe that the hedge % you get will be far higher than the usual 30%. This is due to unusually high IVs of May options (thus may options are priced way higher than usual giving us very high hedge %). If we see a volatility collapse after the election results then May options will lose far more value than Jun options (even if price is unchanged) and our spread can go into profit even without price changing.
I would suggest a small position to test this out or just paper trade to see how fast changing volatility / price would affect the spread. It is important to play safe around such volatile events, especially when trading options.
NOTE: Apr-May diagonal spread was the opposite of this (Apr IVs were lower than May IVs). A diagonal spread was not recommended in such a case as we will be buying options with higher IV and selling options with lower IVs which is not a good idea.
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Srikanth Kurdukar
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paa
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| Post: #187 Posted: Tue May 13, 2014 7:17 am Post subject: |
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Please advice (stop loss etc.) on Jun 7000ce(Buy) - May 7200ce(Sell) diagonal spread
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SwingTrader
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| Post: #188 Posted: Tue May 13, 2014 7:44 pm Post subject: |
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| paa wrote: | Please advice (stop loss etc.) on Jun 7000ce(Buy) - May 7200ce(Sell) diagonal spread
Regards |
There is no fixed SL for diagonal spreads. I usually look for a reason to get out of a diagonal trade once the profit crosses 12-15% of margin + trade cost. On the downside watch NS price action and get out of the trade if you see price breaking down. Currently there is no sign of a breakdown but keep watching in the next few days as things can get crazy and anything can happen. Trading anything is risky at the moment.
Also, look to close the trade when there are only three trading days left to May expiry. The "gamma" of near month option increases significantly close to expiry and any small change in price can result in crazy swings in trade profitability.
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mikky
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| Post: #189 Posted: Tue May 13, 2014 7:58 pm Post subject: |
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suggest to hold till Monday...expect bounce on NIFTY again after confirmation of result if NDA gets majority.
It will be difficult to calculate Stop Loss as u have not mentioned the prices as well as number of lots....
Sorry for interferring as this question is not for me...
| paa wrote: | Please advice (stop loss etc.) on Jun 7000ce(Buy) - May 7200ce(Sell) diagonal spread
Regards |
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jacky75
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| Post: #190 Posted: Tue May 13, 2014 10:03 pm Post subject: currency diagonal spreads |
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ST sir,
How about trading currency diagonal spreads ? could you please comment your views on feasibility of trading currency diagonal spreads; considering liquidity etc. |
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SwingTrader
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| Post: #191 Posted: Wed May 14, 2014 7:39 am Post subject: |
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| mikky wrote: | ....
Sorry for interferring as this question is not for me...
....
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No issues, your posts are welcome. Please post any relevant thoughts/info you may have on diagonal spreads here.
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Srikanth Kurdukar
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SwingTrader
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| Post: #192 Posted: Wed May 14, 2014 7:41 am Post subject: Re: currency diagonal spreads |
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| jacky75 wrote: | ST sir,
How about trading currency diagonal spreads ? could you please comment your views on feasibility of trading currency diagonal spreads; considering liquidity etc. |
Last checked I had seen some mispricing in currency options. In my testing I found that few trades that should have profited turned into losses and vice versa. I did not find time to investigate further. I will check again and see...will post later what I find.
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Srikanth Kurdukar
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paa
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| Post: #193 Posted: Wed May 14, 2014 7:45 am Post subject: |
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Thanks ST Sir
Regards |
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Gemini
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| Post: #194 Posted: Thu May 29, 2014 6:45 pm Post subject: |
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Hello,
Normal days are back as VIX has cooled down.
Found a good diagonal put pair today : 7100P June sold at 64.3 and 7300P July bought at 193. Let us see how this trade turns out to be.
(System that I follow has given sell signal today and hence this trade).
Happy Trading  |
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Hydrogen
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Joined: 18 Feb 2014
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| Post: #195 Posted: Thu May 29, 2014 10:22 pm Post subject: |
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| Gemini wrote: | Hello,
Normal days are back as VIX has cooled down.
Found a good diagonal put pair today : 7100P June sold at 64.3 and 7300P July bought at 193. Let us see how this trade turns out to be.
(System that I follow has given sell signal today and hence this trade).
Happy Trading |
Hi Gemini
Can you disclose your system here ? |
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