More delta for “free” – a possible adjustment to increase exposure with little impact on the downside

All those who are following the Trading Mate portfolio know that we are currently long on EuroSTOXX 50. A bullish vertical spread has been opened in 2 moves, first buying the call 3775 and then waiting for the up move in the market to complete the structure by selling the call 3850. Both expiring in April.

Clearly the profit potential now is capped so what if there is a signal to further increase our exposure on EuroSTOXX? There are many alternatives, but most of them would involve increasing the risk on the downside.

Since we are confident in the models but we also know that anything can happen, an alternative to add positive delta adding little or no risk on the downside is preferred.

Our position looks like the spread below (in dotted line) while the proposed adjustment consists in adding a call backspread at almost no cost to add positive delta and vega to our strategy.

So, if Trading Mate will increase the exposure, this might be a good solution to ride the expected move in the market without having material new risk on the downside.