RFH,
Since it is your intention to keep your longs and continue this trade. I would recommend that you roll your longs down from the 80 to the 75 to capture some of that profit. Next you need to roll your shorts out a month or 2 and down a strike or 2. Try to do these short rolls for a credit or a very small debit. If XLE does not come back quickly you might have to roll your shorts out and down again. Another consideration is to add additional longs with your profits. Keep your ratio of longs to shorts as you now know that can save your ass.
Rick
--- In ConservativeOptionStrategies@yahoogroups.com, "RobertH" <robhansen5252@...> wrote:
>
> David, I would very much appreciate an example of a trading plan for diagonals. I did leave 3 longs uncovered to allow for some profit if XLE shot down, and it seems to have worked in my favor. My original plan was to keep the leaps intact and sell puts monthly against them on a ratioed basis. Any additional instruction or ideas would be greatly appreciated.
>
> RFH
>
> --- In ConservativeOptionStrategies@yahoogroups.com, David Lothrop <david@> wrote:
> >
> > I can't tell you what to do with your money. Here is what I would do....
> >
> > (1) You need a trading plan for diagonals that includes adjustments
> > (2) You could Close the trade for a profit if you are not comfortable
> > with your position.
> > (3) If you want to stay in your trade, you will need to roll your short
> > puts soon. Your delta's are very high (not getting any time decay) and
> > could be adjusted down to an at the money strike or further out of the
> > money. You could pay for this by rolling down your long strikes to a
> > delta near -.80. Your delta's are over .95, I would roll them down
> > and either increase my position size with the proceeds or book the
> > profits. For example:
> >
> > Roll the Jan12 80 puts to 65 for a -.77 delta. This locks in your
> > volitility and price gains for the long puts. Then take some of the
> > proceeds roll down the short puts so your delta difference is about .40
> > as you approach expiration. You could also be assigned here with these
> > high short delta's (but that may be part of the plan?) Roll the 55
> > and 56 short puts to 49 .
> >
> > If you need an example trading plan for diagonals I can point you to
> > some I have found.
> >
> > As always do your own analysis and make your own trading decisions.
> > Trade your plan and plan your trade.
> >
> > Hope this helps - Good Trading,
> >
> > DLo
> >
> >
> > RobertH wrote:
> > > I have a diagonal leap put spread going in XLE (current price 49.68). Here are the details:
> > >
> > > long 13 XLE Jan12 80 puts cost basis 24.35 (current price 31.65) delta -.95
> > >
> > > Short 5 Jul 55 puts cost basis 1.59 (current price 5.75) Delta -.91
> > >
> > > Short 5 Jul 56 puts cost basis 1.98 (current price 6.70) Delta -.94
> > >
> > > The delta of the entire position stands at -296.20. I'm at a loss as to what to do with this position. I'm sure the huge negative delta is due to the 3 more leaps I have than short puts. I've been reluctant to take off the shorts since my history dictates that as soon as I do, the underlying changes direction and starts shooting up.
> > >
> > > Any Suggestions?
> > >
> > > Thanks,
> > > RFH
> > >
> > >
> > >
> > > ------------------------------------
> > >
> > > Yahoo! Groups Links
> > >
> > >
> > >
> > >
> >
>
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