When a long gamma strategy is being used; ie a short calendar, long straddle, or short butterfly what's the minimum ratio of gamma over theta that you guys are willing to accept? Also, with respect to the short calendar, what's the minimum ratio of short vega over theta that you are looking for?
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Calendar spreads
- Thread starter ChrisM
- Start date
Hey Mav,
This is a super old thread, so most likely you won't even read this, however....
I just wanted to say thanks for outlining your ideas about shorting calendar spreads around earnings. Not sure if you still do these or not, but I am just starting to test them out, and I got a nice home run on NKE, after their earnings result.
I made some nice cash, even though my entry was far from perfect. I trade through IB, and surprisingly the margin of the short calander is similar to naked shorts, so profits need to be accounted for accordingly (note to self...).
The NKE example is probably an extreme case, with shares gapping down 10%, but this strategy avoids one of my trading flaws - running for the doors as soon as I whiff some profit. Since I can't trade the option till the open, the gaps are already there, and I take the profit, or exit at BE or with a slight loss.
Thanks again!
This is a super old thread, so most likely you won't even read this, however....
I just wanted to say thanks for outlining your ideas about shorting calendar spreads around earnings. Not sure if you still do these or not, but I am just starting to test them out, and I got a nice home run on NKE, after their earnings result.
I made some nice cash, even though my entry was far from perfect. I trade through IB, and surprisingly the margin of the short calander is similar to naked shorts, so profits need to be accounted for accordingly (note to self...).
The NKE example is probably an extreme case, with shares gapping down 10%, but this strategy avoids one of my trading flaws - running for the doors as soon as I whiff some profit. Since I can't trade the option till the open, the gaps are already there, and I take the profit, or exit at BE or with a slight loss.
Thanks again!
Haha, I too just found and read through this whole thread earlier this week. I learned a lot more from Mav's posts than any book will teach me. Too bad he stays away from the Option forums now.
I was going to paper trade this strategy for a while and see how it pans out. I wish I could find a filter on events like he has other than an earnings announcement.
I was going to paper trade this strategy for a while and see how it pans out. I wish I could find a filter on events like he has other than an earnings announcement.
Quote from SideTrader:
Haha, I too just found and read through this whole thread earlier this week. I learned a lot more from Mav's posts than any book will teach me. Too bad he stays away from the Option forums now.
I was going to paper trade this strategy for a while and see how it pans out. I wish I could find a filter on events like he has other than an earnings announcement.
oh, he does? I never knew that.
Paper trading has never really helped me. I need to have skin in the game. A smaller position size is my style of paper trading. Many people have told me you can never learn about the greatest variable when you papertrade - yourself.
I'm using earnings.com for earnings, Yahoo for news, and finviz for highs. Not yet utilised ivolatility for vol plays.
Quote from SideTrader:
Haha, I too just found and read through this whole thread earlier this week. I learned a lot more from Mav's posts than any book will teach me. Too bad he stays away from the Option forums now.
I was going to paper trade this strategy for a while and see how it pans out. I wish I could find a filter on events like he has other than an earnings announcement.
I don't stay away. I just put about as much material as I can on the option forums so it's all on here. Glad everyone is getting a lot out of the thread. Short calendars are ideal in a professional trading account where you don't get handcuffed by the margin issues.
Quote from Maverick74:
I don't stay away. I just put about as much material as I can on the option forums so it's all on here. Glad everyone is getting a lot out of the thread. Short calendars are ideal in a professional trading account where you don't get handcuffed by the margin issues.
Thanks Mav for all the posts. I am sure I have read far less than a fraction of them, but I really appreciate your efforts in trying to drum it through mine and everyone elses head that, as seductive as some option positions appear at the outset, there is no free lunch, or if there is, it is to be had on the option floor.
Quote from Maverick74:
Chris,
I'm working on a qqq trading strategy. I agree that the qqq's are not necessarily the best vehicle for flys or condors. I'm going to create a position that basically is going to involve short term trading around a qqq straddle. The basic core of the strategy will be look for support levels in the qqq and buy shares of the qqq's and sell the ATM straddle. This position will be aggressively traded and can be either long or short. The premium from the straddle will be used to offset any directional losses. The reason behind trying to buy support levels is because when the qqq's come in they will have a little more juice on the options and the rallies will take that juice back off. BTW, the sold straddle will obviously be a front month straddle. The position in the underlying will only be held for 2 to 3 days at a time. And a stop will always be placed on the underlying position.
Mav,
You might have answered this before, but with reference to the strategy above, instead of buying the underlying to neutralise the delta, would you consider opening another short straddle just OTM should the underlying move away quickly from your original entry?
Perhaps if you were to short the next strike, you could neutralise the increasing(descreasing) delta.
What's your thoughts on this strategy over just buying the underlying?