Stock / Symbol: SPDR Dow Jones Industrial Average / DIA
Option Strategy: [private_monthly]double diagonal[/private_monthly]
Price at trade post: $135.18
Reasoning: Between now and November expiration, the standard deviation calculation for DIA puts it in a trading range between [private_monthly]130 to 141. I'm going to use a Double Diagonal here with a slight upside bias.[/private_monthly]This trade has a delta 16.65, a positive theta of 6.50 and a positive vega of 48.89. [private_monthly]The calls we're selling have a delta of .24 and the puts we're setting have a -.42 delta. The probability of success on this trade is 56%. If DIA either trades up to $139 or down to $132.50, we'll either stop out of the trade or adjust the position.[/private_monthly] The goal is to exit the trade where were up approximately 10%.
Trade Details:[private_monthly]
BTO 3 DIA Dec12 139 calls
BTO 3 DIA Dec12 133 puts
STO -3 DIA Nov12 138 calls
STO -3 DIA Nov12 134 puts
for a max net debit of $1.28 per contract (day order, limit order). Try to get filled closer to the mid, currently at 1.25. If not filled today, ok to try again tomorrow.
Requirements:
Cost/Proceeds $375
Total Requirements $675.00
Estimated Commission $18
[/private_monthly]
Max Risk: $675
Max Reward: $180 or 26.7% [private_monthly]between $134 and $138 by Nov 16
Profit Range: $132.50 to $139 by Nov 16
Suggested Upside stop: @ $139
Suggested Downside stop: @ $132.50
[/private_monthly]
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