Calendar spreads OPTION opportunities

Trading Education Buyer

Trading Education Buyer

Take a look at this support

No reason why you can not make money writing , with two months to expiry , below the support .

Dax GERMAN 30

9900 put dec 29.5 to buy

Jan 9950 puts .... 89.2 to sell

Chances are it will go to <50 on expiry in or 3 weeks , probability trade.

potential profit 20.5 less costs to close


Your worst risk on this trade is , the price moves near the short option and option premium rises to 200.

Net potential risk is 130 , but probability is low.

You have to have some fundamental and technical bias to your trades.

major supp.jpg


A calendar spread is simply buying a far-month option and then selling a near-month option at the same strike price. Part of the rationale is that the time erosion of the near month is usually greater than the time erosion of the long month. The net result is a time erosion gain every day you are in the trade. Calendar spreads are also called horizontal spreads. Here is an example of a calendar spread:

Sell to open September 40 call.

Buy to open October 40 call.

https://www.google.co.uk/webhp?sour...UTF-8#q=trading calendar spreads for a living
 
If you like the idea of buying the calendar spread (-sept +oct).... Why then do you say the opposite with +dec -jan in DAX? And you're selling the bigger strike... 9950 vs buying the 9900...?

Why not keep it simple and stick to the 9900 so you avoid being short the spread between strikes.
 
JackRab said:
If you like the idea of buying the calendar spread (-sept +oct).... Why then do you say the opposite with +dec -jan in DAX? And you're selling the bigger strike... 9950 vs buying the 9900...?

Why not keep it simple and stick to the 9900 so you avoid being short the spread between strikes.
More...


Sept /oct was a example for some new traders to understand calendar spread.


The dax trade is a real trade 50 ticks here or there did not make much difference , I will close it in 3 weeks . Same strikesare better on risk reward , I was just looking at the premium I could receive and pay. , this offered me some more premium.

At end of December expiry , much of the January premium will drop by 60 , I hope , and dec cost is 29 , I have potential 30 to gain by closing January for 60 profit
 
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http://www.investopedia.com/terms/r/reverse-calendar-spread.asp

DEFINITION of 'Reverse Calendar Spread'
An options or futures spread established by purchasing a position in a nearby month and selling a position in a more distant month. The two positions must be purchased in the same underlying market and must have the same strike price. The goal of a reverse calendar spread is to capitalize on major price fluctuations.


http://www.investopedia.com/terms/c...dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
 
The calendar spread is deployed in a sideways market to take advantage of the larger time decay in the front month. The risk to the calendar spread is that the market moves to quickly or goes too far from the short strike in either direction.
The risk is limited by buying a long dated option and the profitability is limited.
The suggested trade is betting that the market movements will be greater than the daily time decay in the front month versus the back month. So the calendar spread is sold instead of bought. The whole trade is taken off either before or at the expiry of the front month contract.
The common trade is to buy the spread and earn the theta decay advantage with no view.

If I wanted to bet for a big move, I would just buy an option in the direction I like and have unlimited upside with the ability to exit in the underlying contract After hours. I would accept the time decay of the option and assess the potential payoffs against the price paid for the contract.
 
The current market is: Dec9900 = 7 and Jan9950 is 74 so if you did trade your prices listed above, you are down 22.5 in the front month with higher time decay and up 15.2 in the back month for a net loss of 7.3 ticks. This current mark to market for your strategy is consistent with what you would expect on a calendar spread. This is why most people would buy the calendar spread instead of doing a reverse calendar spread or selling the spread. This mark to market does not include the cost of commissions which would double your loss at this point or after 11 days have passed. Not very exciting but then calendar spreads move slowly ...
 
Stymie said:
The current market is: Dec9900 = 7 and Jan9950 is 74 so if you did trade your prices listed above, you are down 22.5 in the front month with higher time decay and up 15.2 in the back month for a net loss of 7.3 ticks. This current mark to market for your strategy is consistent with what you would expect on a calendar spread. This is why most people would buy the calendar spread instead of doing a reverse calendar spread or selling the spread. This mark to market does not include the cost of commissions which would double your loss at this point or after 11 days have passed. Not very exciting but then calendar spreads move slowly ...
More...

I expect 30 net by next week
January is now 63 to buy back
DEC IS 5

Breakeven

Expect 30 profit by next week

Still worth doing this trade
 
Stymie said:
The current market is: Dec9900 = 7 and Jan9950 is 74 so if you did trade your prices listed above, you are down 22.5 in the front month with higher time decay and up 15.2 in the back month for a net loss of 7.3 ticks. This current mark to market for your strategy is consistent with what you would expect on a calendar spread. This is why most people would buy the calendar spread instead of doing a reverse calendar spread or selling the spread. This mark to market does not include the cost of commissions which would double your loss at this point or after 11 days have passed. Not very exciting but then calendar spreads move slowly ...
More...


Can you suggest similiar spreads on S and P?
 
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