<\/p>\n
\n A few weeks ago, we introduced a new strategy to our members. While the double diagonal spread is a well-known strategy, we are trading it with a unique twist. The double diagonal strategy is part of SteadyOptions service<\/a>, along with straddles<\/a>, strangles<\/a>, calendars<\/a>, etc.<\/strong><\/p>\n One of our members mentioned, “I realize they are lower risk in the sense that they can be open longer without big losses, but it feels to me like playing not to lose<\/strong>.”<\/p>\n Here is a response from our contributor @Yowster<\/a>, who introduced the strategy:<\/p>\n Well… let me outline the reasons why I like them (and I’ve been doing a ton more of them in personal trades in addition to the official ones, tracking even more of them).<\/p>\n Currently, we have 4 DDs open as official trades, which is the maximum you are likely to see at any given time, leaving plenty of slots for other trade types. Members have different risk tolerances, so not every trade type we use is suitable for all members. However, for those who can’t monitor the market constantly and for trades where a higher capital allocation is desired due to lower downside risk, DDs can be a great fit.<\/p>\n As one of our members mentioned:<\/p>\n Regarding the “playing not to lose” comment, managing downside risk is one of my primary goals with SO trades. I can have roughly 75% of trades be profitable, with most losses limited to below 10%. This math works out very well over the longer term.<\/em><\/p>\n Many option forums or traders will report a win percentage and total percentage over a few years. However, over long periods, the unlikely occurrence of a higher risk\/higher return strategy can greatly reduce a portfolio. The cost of extra options is worth the alleviation of risk. Historically, this has been one of our better-performing trades over time.<\/p>\n Thank you, Yowster. I appreciate that some trades are large enough stocks that you can exceed the recommended allocation without significantly affecting the float. I completely respect that this strategy is for a $100k portfolio.<\/em><\/p>\n To put things in perspective, we closed 9 DDs so far with an average return of 5.1% and an average holding period of 9 days. Only 2 losers, both at 2-3%, and none of the trades were down more than 5% at any given time. Even when the stock doesn’t move, the losses remain minimal.<\/p>\n If someone believes that 5% is not a good return for options trades, I suggest reading Is 5% A Good Return For Options Trades?<\/a>. Some options gurus may claim you should aim for at least a 100% gain in each option trade, but they often overlook the associated risks. On a risk-adjusted basis, these results are almost too good to be true. They are also easy to open, and because the holding periods are longer than straddles, members have more time to enter. Closing can be done with GTC orders, and many times members achieve better results\u2014just check the previous DD discussion topics. Commissions impact is negligible; in today’s environment, many brokers offer zero commissions, and even for those who pay $0.30-$0.50 per contract, the commission impact is less than 0.5% per trade.<\/p>\n As for the statement “playing not to lose”\u2014guilty as charged. Limiting losses is our main goal at SteadyOptions. Over the last 12 years, we have produced triple-digit gains while keeping drawdowns very small.<\/p>\n\n