Trading Diagonals

Trading Diagonals
Trading Diagonals

Why do we play weekly diagonals?  This was a trade we made today with our members and the reasonging behind it. 

 

smiley = hidden ticker in respect to our premum members

 

I received a lot of questions about the smiley trade from new members:

New smiley Diagonal Trade

Sell to Open the 8/3 $52.5 Puts

Buy to open the 9/21 $52.5 Puts

My fill was executed at a debit of $.96

Next week we will roll the weekly option from 8/3 to 8/10 and collect premium against this trade.  We should looke to collect around $450-$500 per week if the trade works out breaking us even in around 3 weeks.  We then would have 3 weeks to keep collecting premium for around a total gain of $1200-$1500 if all works out.  We then would look to roll the 9/21 put like we have in the case of PEP to keep the trade going if the set up remains strong.  This trade did not work out for us last time, but smiley  just gave us the 13/30MA cross I was waiting for.  

 

**Chart hidden but shows what we are looking at in trade alert email**

 

Explanation:

In this trade we bought the 9/21 $52.5 for $1610. We then sold the 8/3 $52.50 put against that for a credit of $650 bringing or price of that 9/21 put down to $960. 

Next Thursday or Friday we will "roll" the 8/3 put we sold to the following week of 8/10 to collect more money on this trade. Let's say we collect $500 next week by selling another put against it we then bring our cost down to $460.  Then, the next week we do the same and say we sell another for $500 we then bring the cost to near break even. We then have 3 weeks left to keep collecting money on it so should make anywhere between $900-$1500.

At the end of the trade (9/21) we will roll the bought put out a few more weeks and restart the process. Its slower, but when your portfolio starts bringing in the weekly money you then will use that money to add on more trades because next week if the trade works out you will receive a credit in your account for whatever the difference is between the put we sold today and the put we sell next week.  You can basically start using other peoples money to trade in your account weekly with this method because you are collecting a weekly paycheck by selling the options.   We are using option to our advantage here.  Learn to trade like the pros and learn to trade for life.