Primary task for Friday is to manage the call diagonals. /ES rising overnight and it looks like there could be a battle at 4,000, which is what I expect and desire.
The P/L looks like below, but it is misleading and does not capture the scenario you are going to try to exploit. Actual profit will be closer to the "theoretical" (ie, the upper) price line. I'm embarrassed to say that I only realized this fairly recently, after taking off diagonals for $4 that were worth $20 at the close.
You always take these down to the wire. (well, you run em down til the short options come off near worthless anyway.) There is some gamma risk that comes into play when the short strike and closing price are right together, but that doesn't happen too often. Might happen tomorrow, we'll see. Remember these are euro-style options, cash settled, no assignment risk, so you can run them down to the wire with no worry even if the short side goes itm.
Anyway....
The P/L looks like below, but it is misleading and does not capture the scenario you are going to try to exploit. Actual profit will be closer to the "theoretical" (ie, the upper) price line. I'm embarrassed to say that I only realized this fairly recently, after taking off diagonals for $4 that were worth $20 at the close.
You always take these down to the wire. (well, you run em down til the short options come off near worthless anyway.) There is some gamma risk that comes into play when the short strike and closing price are right together, but that doesn't happen too often. Might happen tomorrow, we'll see. Remember these are euro-style options, cash settled, no assignment risk, so you can run them down to the wire with no worry even if the short side goes itm.
Anyway....
"If The Fool persists in his Folly he will become wise." - William Blake