{"id":6696,"date":"2022-03-27T20:46:00","date_gmt":"2022-03-27T15:16:00","guid":{"rendered":"https:\/\/unofficed.com\/theta\/?p=6696"},"modified":"2024-01-16T20:58:01","modified_gmt":"2024-01-16T15:28:01","slug":"adjustments-of-diagonal-spreads","status":"publish","type":"post","link":"https:\/\/unofficed.com\/theta\/adjustments-of-diagonal-spreads\/","title":{"rendered":"Adjustments of Diagonal Spreads"},"content":{"rendered":"\n<h4 class=\"wp-block-heading\" id=\"h.3ls5o66\"><strong>Friday, March 27th, 8:58 PM<\/strong><\/h4>\n\n\n\n<p>As per the concepts of Uptrend specified in the bounce theory, We\u2019re in Uptrend in India VIX as you can see here &#8211;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.tradingview.com\/x\/6yrvbNBF\/\">https:\/\/www.tradingview.com\/x\/6yrvbNBF\/<\/a><\/p>\n\n\n\n<p>BankNIFTY broke the downtrend today but We need to take note that today we had an RBI event!<\/p>\n\n\n\n<p>So if we give the legroom of this fundamental aspect, (Fundamental events sometimes trigger unnecessary and unrelated chaos) We will still consider it as a Downtrend.<\/p>\n\n\n\n<p>Anyways, with rising cases of Corona Viruses and as World markets are currently going down, it is highly unlikely that the high of today\u2019s will be broken on Monday.<\/p>\n\n\n\n<p>So, Today, we have basically Swing high. (which in my personal opinion, is lower high of the downtrend).<\/p>\n\n\n\n<p><a href=\"https:\/\/www.tradingview.com\/x\/Z3dLyIKJ\/\">https:\/\/www.tradingview.com\/x\/Z3dLyIKJ\/<\/a><\/p>\n\n\n\n<p><strong>My current view is &#8211;&nbsp;<\/strong>It should trade between \u201cResistance I\u201d to \u201cSupport\u201d<\/p>\n\n\n\n<p><strong>My current fear is &#8211;<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Rising VIX &#8211;<\/strong>&nbsp;VIX is a metric of volatility. IndiaVIX is the metric of India\u2019s volatility. It is technically in an uptrend. Volatility increases when irrationality kicks in. Irrationality kicks in when fear kicks in. Fear kicks in when the market goes down. It is as simple as that!<br><br>When VIX goes high, the prices of options also go high! So, it is also possible that CE prices shot up as the market fell. Now, it makes no sense to sell our usual strangle or straddle.<\/li>\n\n\n\n<li><strong>Wide Spread &#8211;&nbsp;<\/strong>The spread (High and low) of a week is huge which is leading to huge unrealized losses in the middle.<\/li>\n<\/ul>\n\n\n\n<p><strong>Setup 1:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>+1x 30APR2020 20000PE &#8211; \u20b9 1884.75<\/li>\n\n\n\n<li>+1x 30APR2020 20000CE &#8211; \u20b9 1903.9<\/li>\n\n\n\n<li>-1x 01APR2020 20000PE &#8211; \u20b9 1330.9<\/li>\n\n\n\n<li>-1x 01APR2020 20000CE &#8211; \u20b9 1786.15<\/li>\n<\/ul>\n\n\n\n<p>Breakeven: 17247-23915 (Considering the IV stays same)<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/DTMU3xlRYfmekUIztdTfRNy-yFePiD6hU5ZQBSarRaPr5a8ARrBv5H_WxK-_Pgz8lW5DkeXuDmN9V7xuiY5ioE41f9Mat08LF46oyTLgKSyejguXzYV2Hz4-IrG_rNqoSSdoA9iItWaIrVTjz1JvGu8.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p><strong>Setup 2:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>+1x 30APR2020 16000PE &#8211; \u20b9 834.15<\/li>\n\n\n\n<li>+1x 30APR2020 22000CE &#8211; \u20b9 900.6<\/li>\n\n\n\n<li>-1x 01APR2020 16000PE &#8211; \u20b9 294.7<\/li>\n\n\n\n<li>-1x 01APR2020 22000CE &#8211; \u20b9 362.65<\/li>\n<\/ul>\n\n\n\n<p>Breakeven: 14409-24458 (Considering the IV stays same)<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/Mi6bPLygBLdm5QkkFQZRFG9qFGkMNOPeQuWW19GWKz8Jx5YB9nyHI96a3servA2y78OSFx63A9c0vwW041CyXR3j2c17ruD444YvLjPEqJiqXGU3P2A0gSWGGVEBsb02dAJLEb5Ijlut7wNg_3OHLPk.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.20xfydz\"><strong>Monday, March 30th,10:49 AM<\/strong><\/h4>\n\n\n\n<p>Here comes the important part i.e., managing the trade. Although apart from the above two setups we have taken lots of other similar setups. But Let\u2019s talk about what we did in a nutshell.<\/p>\n\n\n\n<p>Basically, the market kept consolidating but the IV was not increasing either. So, we decided to contract our breakeven.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>+1x 30APR2020 17000PE &#8211; \u20b9 1047<\/li>\n\n\n\n<li>+1x 30APR2020 21000CE &#8211; \u20b9 1231.5<\/li>\n\n\n\n<li>-1x 01APR2020 17000PE &#8211; \u20b9 278.3<\/li>\n\n\n\n<li>-1x 01APR2020 21000CE &#8211; \u20b9 389<\/li>\n<\/ul>\n\n\n\n<p>Breakevens: 16110-22771(Considering the IV stays same)<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/gQBqkvgTFzjehoAr-Oqx6gKfzIg7GIYnAZFFWSFTuYtE39Qko9YvU2STLo_rjmKIygqlCYJY9oVZuwIECpcmYyrB0KxObT7RCm3Ktd-zlksSsLxdGKXwpyNSCP6zvAuRfHSJ_a-JRRVkxFAsWGkUavc.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p>The drawback of these scenarios &#8211; The maximum loss potential kept increasing!<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.4kx3h1s\"><strong>Wednesday, April 1st, 5:09 AM<\/strong><\/h4>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/QTQPggC0w4hT0u5uGn7tpyfct4g91cgXFP0pfpRpPHngUP1gCTz5WQjxF6hwwPTlX5WldFLIab2aAhin1ha5eDtQAj40QyX6D5-3Lrv4USwN82ArDisIkYMQxGitD1jxb3hF8JOEjtwOvFkNjqoOzMk.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p>We closed both the setups on Wednesday Morning in most of the places!<img decoding=\"async\" alt=\"\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/438V5PAoOLvreDUMnnyYuOhoaxCEZYs5xZL_oImM7ggePXT7DwHfwTQnRQy4oXj8QigyMXPcdA4KDHwhvlzEfAodvr0hraXA0s_npeqXc_x9LJ-f6vEVSxYieaph4HJ0oyPYtEAI-6CoZdUZH6tC-iI.png\"><\/p>\n\n\n\n<p>As you can see, it is a snapshot of the second setup unchanged. If it is changed as it was suggested, the profit will be more.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.302dr9l\"><strong>Thursday<\/strong><\/h4>\n\n\n\n<p>But if it was not closed and kept open till Thursday, there would\u2019ve been a significant loss of profits in both setups.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/YqY8lrCtbL2CZjXC64OgtD3PYFASLg4mbhe5P9GPpFA8WS_LEZoU3yuT8q31QHZWa6g1c0i4-cGoOXD1N6WIQ5Lf3X4Yrq4zlQYgPRgQ2qhet37Y1tE-9XFAmfw-4BiXYIBN3bUNMbsDnbnBFZ5PrFM.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/72BC5JtXDYkEE52s2Hx5qlY7wKqA20H1wIJJBAHYUZS6jpWSyjGqMHhCL_sACwRcnSHmvhr292OM8hzS2mWrzGN2jKu7jrovyqlqkt0wDNn9YKfg8euKQYkpqeb7LymWPKnBBYEncCKA_qQktmW_K_M.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.tradingview.com\/x\/K6Du3Q7B\/\">https:\/\/www.tradingview.com\/x\/K6Du3Q7B\/<\/a><\/p>\n\n\n\n<p>It is because in the last two days (as marked), there is significant erosion of volatility. Volatility, as discussed earlier, affects the strike prices with a far expiration date more than the nearer ones.<\/p>\n\n\n\n<p>Volatility also affects the far OTM strike prices even more. So, if kept open, the second setup would also dive into a complete loss.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/Pxl5x7WdTM4959Ek2biPP45iAe95nVwngPvs12EYuMlAApwkxaS6rJycJ196aVJMqEjpNI1ZzSaWCQZgQPdsXmjwbVcOiIcJFOGYNGqD3eSyTcPJTzRJJN6N8auE0f1jAA0MR21auzgOX315Jqhtl7o.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p>Hence, it is very important to manage the trades here as apart from breakeven, We have other metrics to worry about &#8211; Volatility!<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h.1f7o1he\"><strong>Key Points<\/strong><\/h4>\n\n\n\n<p>So, in case of volatility drop, it is more advisable to close Calendar Spreads on Tuesday (The most impact of Vega happens on Wednesday and Thursday.) and to deploy models that are profitable on high implied volatility.<\/p>\n\n\n\n<p>Short Strangles, Short Iron Condors, Short verticals, Covered calls, Naked Put, Credit Spreads &#8211; are such examples. Here are outcomes of two such models deployed on Wednesday &#8211;<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/nbulLsqwJuc4ji5pdLnWaJNFNvr_85GiBBEDydT71ivUwnM7M9mGHSJwdAGIxLy77p1OFMCMpcRXsTXr4WAb_WvCQuyuc6W79JCmr80EVtofsuhy3MWitHGKrPgqAK4xbsjTNQASeVA_Il4rBqS46rE.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p>This is a put ratio spread.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/unofficed.com\/theta\/wp-content\/uploads\/2024\/01\/baFAHBs9Q93-i26m_Sx56BJnrntbV4YAY0JcRLW89RfwF1f5R_Qh2FQgofXLA3_aodJn4qzfEDjDH8xDZXWe_r7JOJz4rXPfMLqe2UiRvIoPUPIUTbORoG3v7P2BT1tG7LtjN68hHrAzTdsKGHbGysU.png\" alt=\"\" title=\"\"\/><\/figure>\n\n\n\n<p>This is a combination of short strangles and straddles. This one is extremely risky and not advisable!<\/p>\n\n\n\n<p>Vix drops over various reasons. News,&nbsp;<strong>Neutrality to the sentiment for which it rose in the first place<\/strong>, like, in this case, any positive news on coronavirus or crude oil will do the work. Also, in an environment of fear, no news is also good news!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Friday, March 27th, 8:58 PM As per the concepts of Uptrend specified in the bounce theory, We\u2019re in Uptrend in India VIX as you can&#8230;<\/p>\n","protected":false},"author":1,"featured_media":6698,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[36,40,44,47,48,43],"class_list":{"0":"post-6696","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-trade-setups","8":"tag-bank-nifty","9":"tag-bank-nifty-option-price","10":"tag-bank-nifty-option-trading-strategy","11":"tag-nifty-option-tips","12":"tag-nifty-tips","13":"tag-nse-banknifty"},"_links":{"self":[{"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/posts\/6696","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/comments?post=6696"}],"version-history":[{"count":2,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/posts\/6696\/revisions"}],"predecessor-version":[{"id":6710,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/posts\/6696\/revisions\/6710"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/media\/6698"}],"wp:attachment":[{"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/media?parent=6696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/categories?post=6696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/unofficed.com\/theta\/wp-json\/wp\/v2\/tags?post=6696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}