2 strategy Conservative Portfolio: The 20 day double diagonal & 30 day Calendar by Dan Sheridan

Review of 2 Strategy Conservative Portfolio: The 20-Day Double Diagonal & 30-Day Calendar by Dan Sheridan

In options trading, selecting the right method can be difficult, especially for traders who prefer a cautious and income-oriented style. Dan Sheridan’s 20-Day Double Diagonal and 30-Day Calendar strategies are designed with conservative traders in mind, providing structured frameworks to reduce risk while seeking steady profits. This review explores the mechanics, benefits, and market conditions under which these two strategies thrive.

The 20-Day Double Diagonal Strategy

The 20-Day Double Diagonal is a refined approach that mixes short-term and long-term options. The setup involves selling near-term calls and puts while simultaneously buying longer-dated calls and puts. This dual construction enables traders to benefit from time decay—a central driver in options trading—while having a safety net with longer expirations.

Setting Up the 20-Day Double Diagonal

To apply the strategy effectively:

• Sell short-term calls and puts: Generally 20 days to expiration, generating upfront premium.

• Buy longer-term calls and puts: One to two months out, offering protection against large price swings.

• Best conditions: A stable market environment where the underlying price trades sideways or within a defined range.

Advantages of the 20-Day Double Diagonal

This setup appeals to conservative traders because it balances opportunity and protection:

• Time Decay Edge: Income comes from the natural erosion of the short-term options’ value.

• Downside Protection: Long options soften the impact of volatility spikes or sharp movements.

• Volatility Benefit: Works well when implied volatility holds steady or rises modestly.

This blend of short and long options makes the strategy a measured way to pursue income while reducing exposure to unpredictable swings.

The 30-Day Calendar Strategy

The 30-Day Calendar operates differently. Instead of combining options with different strikes, this method uses contracts with the same strike price but different expiration dates. By selling near-term options and buying longer-term ones, traders can exploit the varying pace of time decay between contracts.

Implementing the 30-Day Calendar

Execution involves:

• Selling front-month options: Around 30 days to expiration, to collect premium.

• Buying back-month options: Same strike, but later expiration, forming the calendar spread.

• Market outlook: Works best in moderately volatile conditions where swings provide opportunities but do not threaten extreme losses.

Characteristics of the 30-Day Calendar

Key features make this strategy attractive to risk-averse traders:

• Limited Risk: Loss is capped at the net debit paid to establish the spread.

• Profit Potential: Income is generated by the differing decay rates of the short and long options, with gains realized if market activity aligns with the strategy’s design.

This method showcases how traders can earn from market fluctuations while containing downside exposure.

Conclusion

Dan Sheridan’s Conservative Portfolio of Two Strategies—the 20-Day Double Diagonal and 30-Day Calendar—provides a practical toolkit for cautious traders who value both protection and income. By leveraging the advantages of time decay and volatility, these methods help traders move through the options market with confidence. The combined use of both strategies offers balance, risk control, and consistent income opportunities, making it well-suited for investors who prefer a disciplined, steady approach.