Calendar Spreads

Quote from uglyboy:

Are any of you using VIX options to decrease vega on your calendars? I haven't really looked at them too much given how little trading history they have.

Here's a current dual calendar that I opened recently. It's essentially a vega play, with (at current volty) about 90% chance at Sept expiration of BE or better. I would welcome any flaming/comments:

VAS SEPT/OCT 22.5 Put Cal
VAS SEPT/OCT 30 Call Cal
More...

Hey UB would you keep us up to date on your SPX calendar? I've often wondered how a calendar vs. IC would do and saw that you are essentially doing a double calendar at two diff strikes. Very interesting!
 
I'll try! I'm not a great journal writer. I've attached my spread post from the SPX Credit Spread thread:

"Here's a neutral calendar that I opened yesterday on SPX. Essentially it is hoping that volty will increase over the next month (or at least not decline).

SEPT/OCT 1210 Put Cal
SEPT/OCT 1250 Put Cal
SEPT/OCT 1300 Call Cal
SEPT/OCT 1325 Call Cal

I don't think this has any particular name. I call them "crown spreads" due to the expiration risk graph looking like a crown (to me). However, if SPX jumps up or down, it might be better to call it a "clown spread".

I like these because they have some of the "hands off" characteristics of ICs, but allow more adjusting if needed. Also, I think that being pos theta and "some" vega is good going into the autumn. I have some neg vega spreads elsewhere to decrease the horribly pos vega on this one."

Hope this is helpful,

Ugly
 
ok I lied...I said I wouldn't futz with OIH until Sept. However giving some thought as to WHY I bought the 140OCT puts...realized it was more reflexive than thoughtful...why more money into a possibly losing position? No really good reason so I bought them back.
originally BTO for 8.60
STC for 8.40 losing $200 +commish...so that goes into the loss column....:(
 
Sold my neutral VAS dual calendar today. So:

8/8/2006:

BTO SEPT/OCT 22.5 Put Calendar @ 0.15 Debit
BTO SEPT/OCT 30 Call Calendar @ 0.05 Debit
"Average price" per put/call spread = 0.10 Debit

9/8/2006 - Closed today for average price of 0.42 Credit i.e 420%return on debit and about 150% return on margin.

That worked better than planned (which I assume means the next one will work worse than planned). I'm enjoying these neutral calendars - I have one on with IMH and SORC (which I really am excited for).

I would be very interested in hearing about others' experience with this type of "neutral" strategy - It's a relief not to have to pick direction - although perhaps predicting volatility is no easier.

I've been thinking about " scale trading" volatility using a neutral spread - it is something I've done hedging Convertible debs, but it needs deeeeeeep pockets - any insight?
 
Quote from cdowis:

>if you are going to trade the VIX options i suggest you familiarize yourselves with the vix futures first.

CBOE has a couple of webcasts on the VIX.
http://www.cboe.com/LearnCenter/webcast/archive.aspx
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I may have been unclear. What I meant was establishing a neutral position in equity XYZ when it's volty is low. If Volty drops lower, add another neutral spread. Sell when (if) volty goes up. Kind of like buying pork bellies/cocoa/twinkies/whatever as prices drop. I suppose the risk is that volty on equities can go to zero if the stock is delisted, unlike commodities.

I see this as a way to become fantastically poor fantastically quickly, but it is interesting to think about, non?

Ugly
 
Quote from uglyboy:

I may have been unclear. What I meant was establishing a neutral position in equity XYZ when it's volty is low. If Volty drops lower, add another neutral spread. Sell when (if) volty goes up. Kind of like buying pork bellies/cocoa/twinkies/whatever as prices drop. I suppose the risk is that volty on equities can go to zero if the stock is delisted, unlike commodities.

I see this as a way to become fantastically poor fantastically quickly, but it is interesting to think about, non?

Ugly
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Whatever trips your trigger:D The reality is we chose our poison. We must either make a volatility bet or a directional bet...something about "no free lunch". I do agree at least on the surface it looks like a vol bet is less stomach turning.
 
Interesting. So these are straight calendars and not diagonals.
Assuming the 1250-1300 range holds near Sept exp, is your plan to roll any of these or just close them?

Quote from uglyboy:

I'll try! I'm not a great journal writer. I've attached my spread post from the SPX Credit Spread thread:

"Here's a neutral calendar that I opened yesterday on SPX. Essentially it is hoping that volty will increase over the next month (or at least not decline).

SEPT/OCT 1210 Put Cal
SEPT/OCT 1250 Put Cal
SEPT/OCT 1300 Call Cal
SEPT/OCT 1325 Call Cal

I don't think this has any particular name. I call them "crown spreads" due to the expiration risk graph looking like a crown (to me). However, if SPX jumps up or down, it might be better to call it a "clown spread".

I like these because they have some of the "hands off" characteristics of ICs, but allow more adjusting if needed. Also, I think that being pos theta and "some" vega is good going into the autumn. I have some neg vega spreads elsewhere to decrease the horribly pos vega on this one."

Hope this is helpful,

Ugly
More...
 
I placed a calendar at the beginning of the week:
IWM Aug/Sep 69 put @ .85

Market moved down, approaching my downside breakeven, so I added another calendar:

IWM Aug/Sep 66 put @ .95.

This double calendar widened my breakeven points, increased in total potential profit at 68, and put me at delta neutral.

I entered the trade because the IWM was at moderate to low IV, and in a consolidation pattern. I don't roll out for adjustments -- just too complicated for my simple mind. Just add another calendar, or close the position, depending on what the new position looks like.
 
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