So this is something new, said I was done playing earning's and earning's really do suck, but was doing good with double calendars and had built upon the idea which has today unexpectedly fruited the best results I've ever seen from an earning's play.
- It's a reverse double diagonal opened on the day of earning's
- Captures high IV premium, pays less for long legs.
- Literally both sides profited even though price action moved against one side. I've never seen this happen before, both sides profitable even though price action worked against one side.
I may have found my earning's strategy literally the day after being in the valley of despair. It's necessary for the company to report Thursday after-hours for this to work best, so Friday expiration and IV crush can take out the short legs as much as possible. This is how I set it up.
- I sold the $116 (8/30), purchased the $119 call (10/4), this creates a potential backspread loss of $300, but I receive more premium from short legs and pay less for long legs being further OTM. Repeated this process for $101/$104. So short legs were placed 5% out from the current price.
- To avoid getting ran through set another set at $120/$123 and $100/$97. So these short legs were placed 10% out from the current price, or what was the suggested Dell implied move.
In the morning immediately went to close, three of the plays were nicely in profit, the $100/$97 was the only one which presented just an 8% loss. If held until 1pm the positions would've been substantially more profitable as short legs finished decaying premium.
CONCLUSION: I cannot believe I played through IV crush and had price action move against the downside positions, yet the $101/$104 was still in-profit! The way this is opened as a backspread to receive more premium, covering half the implied move (5%) and the actual implied move (10%), with long legs having a month of time it somehow avoided most the IV crush, and actually profited from the IV crush! This did not work with NVDA or CRWD because price traded flat, but more-so my strikes were placed at 16% or way too far out! Should've done 5%/10% and both would've been profitable too!
Dell Reverse Double Diagonal Actually Worked!
byu/breakyourteethnow inoptions
Posted by breakyourteethnow
3 Comments
Thank you to those who keep advising me as learn, using this sub to detail and then get called out for the errors presenting opportunities to learn. Thank you to thoose who’ve commented on prior posts trying to advise, thank you to the mods for running this community which truly helps people am very appreciative for this sub thank you!
With a double calendar, which was working for 3 weeks in a row going 11/11 earning’s, which stopped working the week played 16 earning’s and only half of them worked, the problem was my dates were too close buying the following week, and my strikes were too far out. So my tent structures were shrinking massively.
By buying a month on long leg, by selling inverted or creating a backspread to receive even more premium, the tent structure isn’t shrinking like my old double calendar would which allows playing earning’s more effectively. My tents should not shrink anymore and my only risk is Intel scenario where it runs 20% and the back-up strikes set at the suggested implied move are blown out. This happened once in last 50 earning’s I’ve watched so outlier event.
Wow, bro! it sounds like you’ve had onto a game-changer with this reverse double diagonal strategy. 🙂 Capturing high IV premium while managing to keep both sides profitable, even with price action moving against one side, is no small feat. It’s impressive how you fine-tuned the strike placements and timed everything perfectly with the earnings report. The fact that you found a way to profit through IV crush is huge. I can see how this could become a goto strategy for earnings plays, especially with the right setup and timing. Thanks for this bro