Calendar Spread Basic Setup Question

[misterkel]

I am not so sure setting stops

NEVER use stops with options. Price behavior is unpredictable in short term moves and you can be stopped out unnecessarily, and obviously at a loss.

 

[LaxFan]

Thanks all for taking the time to reply. I'm learning it is much more complex that many instructional videos appear.

 

[taowave]

Did you just say NEVER

NEVER use stops with options. Price behavior is unpredictable in short term moves and you can be stopped out unnecessarily, and obviously at a loss.

 

[MrMuppet]

Thanks all for taking the time to reply. I'm learning it is much more complex that many instructional videos appear.

the only situation you should say NEVER is when it comes to trade off of instructional videos

 

[newwurldmn]

the only situation you should say NEVER is when it comes to trade off of instructional videos

never have unprotected sex with a girl who has aids.

never listen to the dawn.

 

[misterkel]

Did you just say NEVER

Yep.

never listen to the dawn

Finish this haiku, please.

 

[newwurldmn]

Yep.



Finish this haiku, please.

never say a 12 standard dev mov won’t happen.

 

[ffs1001]

More often than not you'll be better off selling the calendar, meaning you buy the near term and sell the far term when realized is low and the far term is overpriced.

Then you have theta and vega working against you, and the only way to profit is via gamma.

PS - the only way the back iv will be higher than the front iv is if there is an event, like earnings, in between the two expiries. And in that case, the back iv is likely to rise with each passing day, thus working against the cal.

 

[TheDawn]

In many cases when the front month is materially higher than the next month, there is likely an event before the first expiration. If you want to estimate your breakeven price movement, you need to estimate both IVOLS after the event and look to see where you breakeven at those expected IVOLs.

If there is an event that pushed the front IV so materially higher, I would most likely consider buying a strangle/straddle to take advantage of it especially if the price is relatively cheaper and hope that the infinite gamma takes over. LOL

 

[Overnight]

...and hope that the infinite gamma takes over. LOL

Can you please explain to me, in simple terms, what infinite gamma means? To my virgin options ears, it sounds like free money. So help me understand infinite greeks.