SPY diagonal hedge/trade

[fradav]

Hi Kim,

 

I'm in the RUT IC. As a hedge against a post FOMC rally I'm thinking of initiating a SPY put diagonal trade similar to what Chris trades, buying Dec 14 170 puts and selling Sep wk4 173s in a 20\15 ratio. If there's a rally it's a good hedge and if the opposite happens the IC goes back in the profit zone and the SPY losses are only temporary (if I recover enough extrinsic over time). VIX isn't that high so Dec puts are not that expensive and could be ok time to enter trade.

 

Any thoughts?

Edited September 18, 2013 by fradav

[Kim]

I plugged it into ONE software and this is what I get:

 

 

The potential gain is pretty small even if SPY is exactly at 173 a week from now, and P/L zone is pretty narrow. Not sure I like it.

[fradav]

Ok, thanks for rapid reply Kim.

[tjlocke99]

kim what is this ONE software?  i google'd it but don't see anything on it?

 

 

I plugged it into ONE software and this is what I get:

 

chart.PNG

 

The potential gain is pretty small even if SPY is exactly at 173 a week from now, and P/L zone is pretty narrow. Not sure I like it.

[Kim]

http://www.optionnetexplorer.com/