Trade Alert: Portfolio 2 — Upside Call Diagonals
Three laddered diagonals. Defined risk. Upside participation without the tail risk of naked premium selling. Date: April 20, 2026
TonyB Commentary
“Low IV, Defined Risk, Upside Participation — Why I’m Buying Diagonals Instead of Selling Puts”
I’m continuing to fill my ladder gradually — adding exposure in a controlled and disciplined manner rather than committing capital all at once. In this type of market environment, pacing matters.
Implementing what we discussed during last week’s live session: I currently believe that short puts in a low implied volatility environment are not offering sufficient reward for the tail risk being taken. Premium is compressed, and while probabilities may look attractive on the surface, the asymmetry is not in our favor if volatility expands or if we experience a sharp downside move.
That said, I still want to participate in potential upside continuation, especially given the persistent strength we’ve seen in key areas of the market — particularly in tech and momentum-driven names. Trends in the Nasdaq and large-cap leaders continue to show resilience, even while volatility remains relatively contained.
For that reason, I am deploying call diagonals — a more balanced way to express a bullish stance while managing risk. These structures give us positive convexity to the upside, allowing us to benefit more efficiently if the market continues to grind higher, without taking on the same downside exposure as naked premium selling.
Each diagonal is structured to represent approximately 20 long deltas, giving us controlled directional exposure without overcommitting capital.
Longer-dated diagonals: Less directional risk, more forgiving if the move takes time to develop, but require a higher upfront debit.
Shorter-dated diagonals: More capital-efficient on entry, offer greater upside leverage if we are directionally correct in the near term, but carry higher sensitivity to timing.
We are also laddering these positions across multiple expirations — both monthly and weekly cycles — to diversify timing risk and avoid being overly dependent on a single market window. This “infield laddering” approach lets us stay engaged while maintaining flexibility.
If my outlook were more aggressively bullish, I’d concentrate more heavily in shorter timeframes to maximize convexity and responsiveness to a sharp upside move.
Looking ahead — if we transition into a sustained downside move, I will look to neutralize the long delta exposure from these diagonals and pivot back into short puts, where elevated volatility would once again provide more attractive premium and better-defined risk/reward.
