So I opened a put diagonal on HOOD early January, BTO .2 Delta end June P strike $90 and STO .2 Delta end January P strike $106. Max loss is 106-90, so $16 per contract. I size my position accordingly.
Things go well as HOOD dips just above 106 and I BTC the end Jan 106 P a week early (to limit Gamma risk) and STO end Feb .2 Delta which is strike 96. Now my Max loss becomes 96-90 so $6.00 per contract, less than half the original. What do you wise guys do in those circumstances? Do you increase the size of the trade BTO more June P and STO a larger number of Feb Puts to allocate the same amount of risk capital to the trade? What about subsequent months if the trend continues: .2 Delta spread might compress further as front month Gamma is higher than back month one. Do I understand this correctly? Missing something?
TIA for enlightening responses.