As of today’s close, it looks like we couldn’t have chosen a better calendar position to enter at a better time than Monday’s double-diagonal trade. In post-session options trading, the position was showing a 5.9% unrealized return on capital at risk, which translates to a Model Portfolio return of about 1.7%…after just two days. But let’s not get carried away—we still have three weeks until April expiration, and a lot can happen in that time.
That early (unrealized) gain is great, but from a risk-management perspective, we’re more concerned with our portfolio greeks. With vega, in proportion to capital at risk, at 2.8%, a +1.8% delta bias isn’t exactly ideal, but we still have more than a point (dollar) to the downside before the strategy rules trigger a risk-management alert. To the upside, our projected risk-management price level at today’s close was approximately SPY $142.90.
The implied-volatility surface map for SPY (IV vs. strike price and expiration) leaves the door open for several possible trades to tailor our risk profile for (slightly different) targets. Whatever direction the market takes over the next two days (if there’s any direction at all), we’ll probably open a second April position by the close on Friday.
Here’s what our risk profile looked like at today’s close: