Double Diagonals
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| Double diagonals are a favorite among professional index option traders. The double diagonal capitalizes perfectly on the moderate range of the index versus singular components by selling a front premium to capture the accelerated time value decay while leaving the back month purchased options to gain value following the expiration of the short premium. This situation creates a long strangle in the index after the expiration of the front options with the choice to roll the short options forward into the short condor or maintain a directional position with one of the long options by allowing the shorts to expire. The spread is limited risk and an excellent choice for range-bound index markets. |
Related Terms: | ||
Ratio Spreads Ratio spreads are an evolution of the bull call or bear put spread. They combine long ... Triple Witching Day The third Friday in March, June, September, and December when US stock options, index options, and ... Risk Reversal The term risk reversal is used in a couple of different ways in trading:In foreign-exchange trading, ... | ||
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