Calendar Spreads

skanan · Feb 21, 2006

I sent couple emails to Tom Preston of ThinkOrSwim to clarify something I don't understand about RC and he replied back. Talking about customer service...

Here is my trade

Buy 1 MRVL mar 62.5 call IV 62.38%
Sell 1 MRVL may 62.5 call IV 48.41%

Total credit $4.20.

This is still on paper trade and let's see how the earning is.

I decide to do this to mar/may to get more gamma rather than mar/apr just in case the stock moves.

RichardRimes · Feb 21, 2006

Quote from skanan:

I sent couple emails to Tom Preston of ThinkOrSwim to clarify something I don't understand about RC and he replied back. Talking about customer service...

Here is my trade

Buy 1 MRVL mar 62.5 call IV 62.38%
Sell 1 MRVL may 62.5 call IV 48.41%

Total credit $4.20.

This is still on paper trade and let's see how the earning is.

I decide to do this to mar/may to get more gamma rather than mar/apr just in case the stock moves.

This is what I don't understand....the IV your buying seems SOOOOmuch higher than the IV's your selling....

ryank · Feb 21, 2006

Quote from skanan:

I sent couple emails to Tom Preston of ThinkOrSwim to clarify something I don't understand about RC and he replied back. Talking about customer service...

Here is my trade

Buy 1 MRVL mar 62.5 call IV 62.38%
Sell 1 MRVL may 62.5 call IV 48.41%

Total credit $4.20.

This is still on paper trade and let's see how the earning is.

I decide to do this to mar/may to get more gamma rather than mar/apr just in case the stock moves.

Shouldn't you be selling the March and buying the May calls? Then you can roll to April and again in May if you like.

EDIT: never mind, it just dawned on me that you are intending to do a reverse calendar.

ryan

IV_Trader · Feb 21, 2006

Quote from skanan:

I sent couple emails to Tom Preston of ThinkOrSwim to clarify something I don't understand about RC and he replied back. Talking about customer service...

Here is my trade

Buy 1 MRVL mar 62.5 call IV 62.38%
Sell 1 MRVL may 62.5 call IV 48.41%

Total credit $4.20.

This is still on paper trade and let's see how the earning is.

I decide to do this to mar/may to get more gamma rather than mar/apr just in case the stock moves.

are u sure that credit=4.20 ? From last quotes is 1.80 or so.
If stock will move less than 10% (up or down) , trade will lose 20-80 cents.

skanan · Feb 21, 2006

Thanks! IV. It's $1.90. I was in a hurry and posting number from the March 62.5 call. Is the 10% move the reason you prefer mar/apr rather than mar/may ?

I'm gald this is just the paper trade. There are many things I don't know.

IV_Trader · Feb 21, 2006

Quote from skanan:

Thanks! IV. It's $1.90. I was in a hurry and posting number from the March 62.5 call. Is the 10% move the reason you prefer mar/apr rather than mar/may ?

I'm gald this is just the paper trade. There are many things I don't know.

IMO , you must run "what ifs" , that is the only way to learn this strategy.
Put greeks aside for a second and try to "guess" next morning variables : vols and absolute move of the stock , then use those in different "what ifs" scenarios.
History of last 3 qtrs shows average MRVL's move of 4% and collapse in IV to middle 30th.
It's all your from here.

skanan · Feb 21, 2006

Quote from IV_Trader:

IMO , you must run "what ifs" , that is the only way to learn this strategy.
Put greeks aside for a second and try to "guess" next morning variables : vols and absolute move of the stock , then use those in different "what ifs" scenarios.
History of last 3 qtrs shows average MRVL's move of 4% and collapse in IV to middle 30th.
It's all your from here.

Thanks IV! Another sign I'm not ready for this RC yet. I looked at quote just a minute ago and found that MRVL did not move much. Then I realized that I wrote down the earning announcement of MRVL wrong! This trade should have been done 02/23 instead. I'll scratch out the trade and redo my homework again.

Do you look at IV data from ivolatility ? Do they have data for different month also ? I would like to know so that I can do this kind of trade by myself.

RichardRimes · Feb 22, 2006

Quote from DonnaV: FEB 13

SHLD... rolled the Feb 115 to Mar 120 at 5.10 leaving a diag for my June 115 and cal for June 120...reason...stock could go up in Mar at least enough to justify the upward roll have reduced debt now to 1.70 for the 115's and 4.05 for the 120's with two rolls left.

FEB 22
SHLD
In the past week the Mar 120 puts had shrunk to the pt that I decided to go ahead a roll 10 Mar 120 to April...for a credit of 2.20...leaving 5 to possibly roll later (to April 115)

IV_Trader · Feb 22, 2006

Quote from DonnaV:

Quote from DonnaV: FEB 13

SHLD... rolled the Feb 115 to Mar 120 at 5.10 leaving a diag for my June 115 and cal for June 120...reason...stock could go up in Mar at least enough to justify the upward roll have reduced debt now to 1.70 for the 115's and 4.05 for the 120's with two rolls left.

FEB 22
SHLD
In the past week the Mar 120 puts had shrunk to the pt that I decided to go ahead a roll 10 Mar 120 to April...for a credit of 2.20...leaving 5 to possibly roll later (to April 115)

More...

are you short on shld ?

RichardRimes · Feb 22, 2006

Quote from IV_Trader:

are you short on shld ?

I guess..the calendar spreads are puts (were OTM) my thinking is SHLD will be heading south april and may....more for fundamental reasons than any other. Hoping of course it stays above 120 in March...THEN down