Calendar Spreads

Donna,
In order to earn time premium (+positive theta) there is always a tradeoff in the wonderful world of options. I'm earning roughly 30 bucks a day for sitting on my rear-end. The tradeoff is gamma exposure. I typically like to roll short options about a week before expiry because gamma risk is too high for my liking in that final week.
 
I see what u mean donna about your greeks, forget that last post. I'm not sure why my gamma exposure is much greater than your example. I see you're earning decent theta w/o a large gamma exposure. I'm afraid greek is not my native tongue, I'm polish for cryin' out loud:D
 
Quote from DonnaV:

I've added a RMBS Feb/May put cal. Have history with this @#%&
so it will be an interesting ride. 10 contracts
Feb 30 Put IV 92.93 +1.30
May 30 Put IV 99.23 -4.80

Delta -59 (should have ratioed to be more delta neutral?)
Gamma -19
Theta +22
Vega +39

these are all expressed in $$ terms
More...

I now have two Feb/May cal's going and decided to update as both are now ITM

WFMI 72.5 Feb/May currently stock is 71.50 and RMBS is 27.19
as I've been trying to formulate guidelines for trading on calendars need to look for
1) initial credit of abt 1/3
2)vols on near term higher than vols on back month
on both accounts I forgot to even look....whoops...
the only thing I got was good direction:cool:

Now however with only two weeks remaining before expiration I need to be careful of having the shorts PUT to me. There is still about 2$ of time value in WFMI so not worried this next week but RMBS is so vol that I might get put at least some of the 10 contracts I have on it. I also need to think abt whether I need to roll down for March...no choice in WFMI as there are no 72.5 strikes but if I roll down to 25 for RMBS I am changing the "character" of the cal.
 
any update Vol Pimp?

Quote from volatilitypimp:

donna,
looks like u have a nice looking wfmi calendar on your hands, there. i also enjoy using calendar spreads on equities. i'm also pretty sure wfmi reports earnings on Feb. 8, so u may want to roll that short strike before that.
Sometimes I like multiple strike calendars using both put and calls. They are not really expensive because the otm "legs" don't cost very much. The p&l graph at expiration looks like a big-top circus tent(wide profit area).
ie. 14 lot Feb/May bmc 20strike put calendar,10 lot feb/may 22.5 call, 10 lot feb/may 25 call. Volatility on this position is up sharply, i have a dilemma myself on adjustment. I'm pondering just closing it out for a small profit. Earnings are Feb.7. Although i have no directional bias on this stock, the volty will get crushed after earnings which would kill a multi-strike calendar. Does anyone have thoughts on adjustment?
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The other thing I'm learning about Cal's...its the "watching paint dry" category of options trading. While everyone else was on the rollercoaster of GOOG last week I was bored as heck!
 
Lol! Love the 'paint dry' comment. It's like the pro golfer. Instead of hitting the ball a bazillion yards and up under trees and hazards, the guy on t.v. is soooo boring, hitting the ball down the middle every time, middle of the green. zzzzzzz, yet those are the guys on t.v., and the best in the world.:p ok, it's a strech, but it gets me through the day.:D
I'm leaving my 3 strike BMC calendar alone until after earnings, rolling short strikes by next friday-ish.

Some guidelines I like to filter for calendars are as follows:
1. find stocks that are under 30 Implied Vol.
2. get at least .50 for short strike
3. if front month IV is 6 points greater than far month, intuition tells me to avoid cal altogether(i'm guessing earnings, fda announcement,upgrade/downgrade is imminent)(gap risk)
4. Look to 'go diagonal' if IV rises(diagonals don't get slammed as much as a pure calendar does when iv comes down)

I also recently put on a JCP double diagonal. Maybe that should be another thread. I sold the Mar 50-60 strangle, and bot the May 47.5-62.5 strangle. I usually like to sell front month strangle 1 standard deviation and find candidates w/ IV in bottom third of 2 yr range. Then I buy the next available 'outside' strike and 1 or 2 months further as well for roll opportunity. If stock moves outside 1 sd within 2 weeks, i'll close at a loss, or turn the position into a 'carnival spread' (multi-strike big top tent lookin' thing).
:cool:
 
great thought VP are the guidelines the same for call cal's as well as put cals?
Quote from volatilitypimp:

Lol! Love the 'paint dry' comment. It's like the pro golfer. Instead of hitting the ball a bazillion yards and up under trees and hazards, the guy on t.v. is soooo boring, hitting the ball down the middle every time, middle of the green. zzzzzzz, yet those are the guys on t.v., and the best in the world.:p ok, it's a strech, but it gets me through the day.:D
I'm leaving my 3 strike BMC calendar alone until after earnings, rolling short strikes by next friday-ish.

Some guidelines I like to filter for calendars are as follows:
1. find stocks that are under 30 Implied Vol.
2. get at least .50 for short strike
3. if front month IV is 6 points greater than far month, intuition tells me to avoid cal altogether(i'm guessing earnings, fda announcement,upgrade/downgrade is imminent)(gap risk)
4. Look to 'go diagonal' if IV rises(diagonals don't get slammed as much as a pure calendar does when iv comes down)

I also recently put on a JCP double diagonal. Maybe that should be another thread. I sold the Mar 50-60 strangle, and bot the May 47.5-62.5 strangle. I usually like to sell front month strangle 1 standard deviation and find candidates w/ IV in bottom third of 2 yr range. Then I buy the next available 'outside' strike and 1 or 2 months further as well for roll opportunity. If stock moves outside 1 sd within 2 weeks, i'll close at a loss, or turn the position into a 'carnival spread' (multi-strike big top tent lookin' thing).
:cool:
More...
 
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