Calendar Spreads

RichardRimes · Feb 20, 2006

ok...I get it...your doing it as a straddle/cal but if it is a reverse arn't you looking for IV greater in the back month?

Quote from skanan:

Here is my short calendar candidate. I appreciate any feedback.

TASR: buy Mar straddle and Sell Sep straddle.
I assume 15 cents slippage from b/a on the spread as worstcase. Total slippage to open and close the short calendar might be about 30 cents.

Buy Mar strike $10 straddle 1.80, sell Sep $10 straddle $3.70. Total credit $1.95

Assume holding for one day, theta lost is about 2.50 cent. If the IV loss 500bp, the spread may be widen to $1.99. To overcome slippage on buying back the spread also, IV has to loss 900bp.

I think I have to try put on one contract to see how much real slippage is. Tasr should move after the earning too so that would help overcome the slippage. Using Maverick leg-in technique could have reduced the slippage too.

I need the real data to see IV before and after earning and price move after earning to be able to project this more accurate.

-Nick

RichardRimes · Feb 20, 2006

so pretty much as described...looking for news or anticipating earnings/news whatever then bang your on it late in trading with the expectation of drop in IV of the front month but not as much in back month then next day? Thanks IV_Trader ....but are you doing this as a retail trader or pro/prop?

Quote from IV_Trader:

just for one day , usually entering after 3pm and closing sometime next day

skanan · Feb 20, 2006

What is "RC" ? Can you point me to the trade ?

Thx,

Quote from IV_Trader:

I posted couple of real samples of RC on another thread , very similar what Mav described.

IV_Trader · Feb 20, 2006

Quote from DonnaV:

so pretty much as described...looking for news or anticipating earnings/news whatever then bang your on it late in trading with the expectation of drop in IV of the front month but not as much in back month then next day? Thanks IV_Trader ....but are you doing this as a retail trader or pro/prop?

Retail.
It's a bit more complex that what you described above , but basically very close. I do it a little different from how Mav describing it in his posts , especially when it's comes to "times to exp" , I almost never put RC if time>15d.

IV_Trader · Feb 20, 2006

Quote from skanan:

What is "RC" ? Can you point me to the trade ?

Thx,

Reverse Calendar , just like your trade on TASR ( personally , I don't think it's a good R/R trade) ; buying front month , selling back month on the same strike

RichardRimes · Feb 20, 2006

Quote from IV_Trader:

Retail.
It's a bit more complex that what you described above , but basically very close. I do it a little different from how Mav describing it in his posts , especially when it's comes to "times to exp" , I almost never put RC if time>15d.

So do you run scan's that look for earnings...etc or looks for changing vol? do you ever do diag? Why don't you like the RR for TASR....btw thanks again!

skanan · Feb 20, 2006

Quote from IV_Trader:

Retail.
It's a bit more complex that what you described above , but basically very close. I do it a little different from how Mav describing it in his posts , especially when it's comes to "times to exp" , I almost never put RC if time>15d.

Hi IV,

I found the trade

http://www.elitetrader.com/vb/showthread.php?s=&threadid=61937&perpage=6&pagenumber=11

It is a nice trade. I still have something I don't understand. When you put on RC with time < 15d, would the theta effect on your RC more than usual ? Also, you don't do multimonths RC such as Mar/Sep but something like Mar/April. What's the reason ?

Thanks

RichardRimes · Feb 20, 2006

Quote from skanan:

Hi IV,

I found the trade

http://www.elitetrader.com/vb/showthread.php?s=&threadid=61937&perpage=6&pagenumber=11

It is a nice trade. I still have something I don't understand. When you put on RC with time < 15d, would the theta effect on your RC more than usual ? Also, you don't do multimonths RC such as Mar/Sep but something like Mar/April. What's the reason ?

Thanks

Thx for finding the thread Nick..I remember it..hey IV_Trader plz feel free to post any RC's you might do coming up. Your style of trading does't really lend itself to real time posting and all the follow-up required but anything you have to contribute will be much appreciated.

One main question I have is WHAT was the primary criteria in doing a RC, Vs a combo or strangle? tia donna

IV_Trader · Feb 20, 2006

Quote from skanan:

Hi IV,

I found the trade

http://www.elitetrader.com/vb/showthread.php?s=&threadid=61937&perpage=6&pagenumber=11

It is a nice trade. I still have something I don't understand. When you put on RC with time < 15d, would the theta effect on your RC more than usual ? Also, you don't do multimonths RC such as Mar/Sep but something like Mar/April. What's the reason ?

Thanks

shakan : ideally , you want your both (long and short) option's premium to be the same next day. If large move in stock occurs , they both might be at zero or , let's day at 10$(very deep ITM), this way you are keeping the most of the premium received. The lesser time left for exp , the more odds for this to happens if stock does move.

Donna , I'm using puts (or calls) only.

RichardRimes · Feb 21, 2006

Update on Calendars in play:

WFMI :mad:

frustrating...a winning play that has become difficult to manage-down again today the March 70 short put is close to no extrensic value left leaving me vulnerable to getting put to so decided to roll and ratio.

BTC Mar WFMI 70p- (10contracts)net debt $7.20 per contract
STO Mar WFMI 65p- (20 contracts) at credit $2.70

soooo I've increased my risk and still have net debt of $1800 (total)

I did roll UP the May 72p to April 70 for a net credit of $2.60

position now is Mar/Apr diag 65(20contracts)/70 (10contracts)puts

RMBS- rolled up May30p to April30p for a net credit of 1.10
holding Mar/Apr 30 put cal.

SHLD no change