Calendar Spreads

Just listened to a free webcast offered by the CBOE with Dan Sheridan...talking about B-flys

He said B-flys and calendars are very similar in that you are looking (overall) for relatively stable not too high vol stocks...and try to avoid earnings.

HPQ will be reporting in May so thats probably why the vol's are so much higher than June. I think I would hesitate to do a regualr cal for that reason...while it looks tempting with that nice fat premium, the calendars where I've ignored earnings have not done very well. Doing 4 month cal's you will always have an earnings risk but you have time on your side. I would do something else with HPQ then after earnings perhaps set up a cal.

interesting webcast...they will have another one (with Dan) May 23rd..check it out. Also I've decided to throw on a B-fly on the spx on my paper trade page and see how that works...locking at May 1285 puts for the short strikes and 1275/1295 for the longs
 
I missed the webinar, I'll have to catch it in a few days when they re-broadcastor archive it. I like Dan Sheridan, he's a character, and interesting guy to learn options from.

That front month vol in HPQ to me portends higher expected range, not sure long calendar would do well here.

donna, whadda gonna do with CME? I think I'm getting a feel for it's movement so I;ll place ic every month and try and keep it consistent. I think i got a bargain for the put vert today 440/430. of course everything could change tomorrow. lol.
 
Quote from volatilitypimp:


donna, whadda gonna do with CME? I think I'm getting a feel for it's movement so I;ll place ic every month and try and keep it consistent. I think i got a bargain for the put vert today 440/430. of course everything could change tomorrow. lol. [/B]
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what I actually DID, riskarb's sound advice notwithstanding, was go ahead and IC it...sold the 460/440 put CS for a credit of 4.30
total credit on the IC is 8.35 which I think will give me a nice cushion and certainly don't believe it will go too much lower than 460 by May exp...the cost was only another 10,000G in BP or margin
 
Donna,

Keep an eye out today for the US Gasoline Stocks report, which I'm expecting to be bad news...8 consecutive weeks of declines..ouch.... Also the U.N. Security Council gave Iran April 28 as a deadline to suspend uranium enrichment or face possible sanctions, yet another date to be worried about.

Bush is trying to do what he can to keep the price of oil down, so we'll see who wins? As usual its far too late to do anything now.

Just an FYI


~J
 
Donna,

It looks like your OIH play went quite well, this drop the past week was pretty impressive/painful.. Did you do any adjustments during the month, or just maintained the original position?

On another note: Do you know where I can find info on how to adjust spreads during certain market conditions? I think my lack of experience comes through when I don't know exactly what to do at the right times. Basically I don't know what to do now :confused: , on one hand I have my gain on the short side, but have a loss on the long. Do I sell another ATM for June? BUt this doesn't seem right, because if OIH reverses and goes up then I could still have a loss on my long and then on my short. Or is there an adjustment to do if this happens.... see this is what I'm talking about... I don't know enough about all the aspects of this strategy...
 
Quote from pipepuller:

Funny that you mention daytrading a Diagonal Cal.. cause that's what I did with GOOG. I figure someone else must have played this if there are a lot of people playing Volatility.

Day before earnings:

BTO SEPT 390 $53
STO APR 430 $5.8

Post- Earnings*

SEPT 390 $81
APR 430 $19

*this is the value of each leg when I rolled my APR 430 to a MAY 450 @ $18.7

not too bad gain for 2 days.. approx $14.8/contract. If I waited until close it would have been $18.8. A little away from my game plan, but oh well. Maybe a little risky, but the premiums are sooo good.
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is this the play your talking abt?
 
Quote from pipepuller:

Donna,

It looks like your OIH play went quite well, this drop the past week was pretty impressive/painful.. Did you do any adjustments during the month, or just maintained the original position?

On another note: Do you know where I can find info on how to adjust spreads during certain market conditions? I think my lack of experience comes through when I don't know exactly what to do at the right times. Basically I don't know what to do now :confused: , on one hand I have my gain on the short side, but have a loss on the long. Do I sell another ATM for June? BUt this doesn't seem right, because if OIH reverses and goes up then I could still have a loss on my long and then on my short. Or is there an adjustment to do if this happens.... see this is what I'm talking about... I don't know enough about all the aspects of this strategy...
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Thanks...yes it has been good.
I actually rolled down from May 155 to June 150 puts for a credit of 1.20 on May 15th...now I have 12 Oct 150/10 June 150.

Your long is still a ways off right? I wouldn't worry about the long strike yet. Sept. you could roll ATM or diag depending on what you think OIH will do. Your guess is as good as mine:( If you roll to a diag for more $$ you are taking a directional risk and eventually it becomes a bull put spread. I would take my time in looking at the charts and the probabilities of where it could end in June. If you aren't sure then split the trade and sell half ATM and half OTM?

"The option trader Handbook" Budwick/ Jabour
Charles Cottle's new book " Perception....don't remember the full title. Cottle is pretty advanced and I haven't yet read it. Making adjustments is the most difficult part of trading time spreads and I'm still learning.
 
Is RichardRimes still the same person I was talking to previously (Donna)?

Oh well..

I guess it could be for both GOOG and OIH as both are looking horrible, I probably just should have gotten out of GOOG when I had the chance. With that trade I just rolled the 450-440-430-420-410.. it was nice premium all the way down.. but now the stock's below my long, so now its got my attention.

As for OIH my only concern is that I'm looking at selling the JUNE 145 or 150 C, but lets say OIH goes up to 155/160 again, my short will be at a $10 loss(145) and my long might be B/E or even at a loss as well. How would you adjust for this come expiration? I didn't prepare for OIH to drop over $20 from its high in about 1 week.

It's funny while OIH was at around 165 I thought now would be a good time to buy puts or do a trade similar to Donna's... but of course I didn't, so now here I am... ahhhh :(

Sorry if I'm question master, but I'm completely blindsided by this drop...
 
If I can butt in...One thing I'm learning about calendars is there is no rule that says you HAVE to hold on to the bitter end. I had a couple of put cal's that have done well and I decided today the the underlying just might start coming back and while there was a lot of volatility out there I could close for a nice profit on the trade. Even though I was giving up some premium in the short.

Have you considered just closing it? Over-all are you still profitable on it? I agree with you its very hard to guess what OIH will do. One of my rules is unless I have a fairly decided opinion on direction or volatility then I don't do anything. This has been such a nasty week I would at least give it until sometime next week to change course.
 
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