Manual
Double Diagonal
A volatility crush play using a short 0DTE straddle and longer-dated insurance.
The “Vol Crush” Play - Profit from elevated IV with low realized volatility.
Overview
| Attribute | Value |
|---|---|
| Environment | Positive Gamma |
| Market Dynamic | IV elevated, realized vol expected to be low |
| Volatility | High IV (>15) but low expected realized vol |
| Primary Goal | Capture vega crush + theta decay |
| Profit Target | 0 DTE straddle decay |
| Max Loss | Defined by 30 DTE strangle (insurance) |
Structure
0 DTE Straddle (Income)
- Sell 0 DTE ATM Call
- Sell 0 DTE ATM Put
30 DTE Strangle (Insurance)
- Buy 30 DTE Call at the +Expected Move
- Buy 30 DTE Put at the -Expected Move
Entry Criteria
- IV is elevated (straddle credit is rich)
- Realized volatility expected to be low
- Price expected to stay within 0 DTE expected move
- 30 DTE strangle placed at the expected move levels
Exit Rules
Profit Target
- Profit from vega crush and theta decay throughout the day
- Close both positions at end of day
Re-centering Trigger
- If straddle hits 25% of credit received, re-center the straddle to ATM
End of Day
- Close all positions at end of day regardless of P&L
Management
- Monitor the straddle - If it hits 25% of credit, re-center to current ATM
- Leave the 30 DTE strangle alone - It’s your insurance, don’t touch it
- Close everything EOD - No overnight risk