I really need to get to bed
GOOD nite ALL
GOOD nite ALL
Calendar Spreads
- Thread starter gatorplease
- Start date
Thanks and I'd be more than happy to post my changes on my LEAP spread. As of right now, I don't want to do anything drastic becuase the bid/ask spread is a little painful on the LEAPS. So far it's doing as expected and I'm not losing money yet.
I have been eyeballing the nearer term calendar's on the QQQ's and I'm wondering if I'm missing something. I put on the following virtual trade:
BTO 20 x QQQQ May 41 Put @ .80
STO 20 x QQQQ APR 41 Put @ .55
$500 debit plus commissions (just used market price)
According to the optionsXpress trade calculator this position has a potential profit of up to $722 with the low side break even on the QQQ's at 39.52 & $42.60 on the high side.
If i'm reading this right it puts me in the money as long as QQQQ stays between $39.52 and $42.60 on Apr expiration day.
That's close to a 3% buffer on the upside and a 5% buffer on the down side (from today's price of $41.50) with a profit potential of 144% minus commissions and I have $500 at risk in a worse case scenario?
I'll see how it plays out with the funny money becuase this seems a little too good to be true.
I uploaded the output of the OX trade calculator. Hopefully it works
I'll be honest and tell you that I'm no where near that sophisticated.
I pretty much buy a standard leap calendar spread and then sell the near term option with the highest premium (usually at the money) month after month. As the price moves around the spread will naturally be diagonal at times to hit the highest premium.
I was actually doing pretty will with this for several months in paper trades, but looking back I had a little bit of a volatility tail wind helping me.
Quote from tuwood:
Thanks and I'd be more than happy to post my changes on my LEAP spread. As of right now, I don't want to do anything drastic becuase the bid/ask spread is a little painful on the LEAPS. So far it's doing as expected and I'm not losing money yet.
I have been eyeballing the nearer term calendar's on the QQQ's and I'm wondering if I'm missing something. I put on the following virtual trade:
BTO 20 x QQQQ May 41 Put @ .80
STO 20 x QQQQ APR 41 Put @ .55
$500 debit plus commissions (just used market price)
According to the optionsXpress trade calculator this position has a potential profit of up to $722 with the low side break even on the QQQ's at 39.52 & $42.60 on the high side.
If i'm reading this right it puts me in the money as long as QQQQ stays between $39.52 and $42.60 on Apr expiration day.
That's close to a 3% buffer on the upside and a 5% buffer on the down side (from today's price of $41.50) with a profit potential of 144% minus commissions and I have $500 at risk in a worse case scenario?
I'll see how it plays out with the funny money becuase this seems a little too good to be true.
I uploaded the output of the OX trade calculator. Hopefully it works
all those future PnL numbers are heavy depended where MAY IV will be on the day of APR expiration (another unknown)
Thurs I noticed a sm decline in the p/l of RMBS when I looked the stock had gone down and since I have a put cal thought ah ha! check the vol's and sure enough the vols have decreased. I've been trying to figure out if I wanted to close it or not since I "thought" the stock would decline, so I've been trying to find some literature which would give some guidelines.
Found a good chat on TOS's wed chat Dec 14, 2005- evaluating Calendar spreads hosted by Tom Preston. he says when your looking at calendar spreads you want your rolls to be (potentially)1.5X your debt and that would include the closing of the spread which is also considered a roll. Since I've rolled UP the long leg from May to April now I have a Mar/April cal so I decided the prudent thing is to close it and take the profits. I was tempted to let the short 30 expire and "hope" for the drop in the stock...but realize that would be kinda stupid as right now I have abt $1.6 per contract profit (from all the rolling around ) so will close this spread then see if after Mar exp I want to open a new one on RMBS.
Since WFMI is below Mar strike I'll wait until just before exp to close that one which should also be profitable. I'm really liking calendar spreads
Found a good chat on TOS's wed chat Dec 14, 2005- evaluating Calendar spreads hosted by Tom Preston. he says when your looking at calendar spreads you want your rolls to be (potentially)1.5X your debt and that would include the closing of the spread which is also considered a roll. Since I've rolled UP the long leg from May to April now I have a Mar/April cal so I decided the prudent thing is to close it and take the profits. I was tempted to let the short 30 expire and "hope" for the drop in the stock...but realize that would be kinda stupid as right now I have abt $1.6 per contract profit (from all the rolling around
) so will close this spread then see if after Mar exp I want to open a new one on RMBS.Since WFMI is below Mar strike I'll wait until just before exp to close that one which should also be profitable. I'm really liking calendar spreads
I did close the RMBS calendar this am.
Over the weekend there was an article in Barron's talking about the high premium in the Jan 90 calls...by the tone of the article I figured RMBS would be up strongly and it was. I left a lot of cash on the table so the MM's will have a nice dinner...sold the spread for $1.85. Net profit (after deducting the remaining .55 debt) is $1.30 per contract.
Not bad since I put the trade on 1/24 the stock was at abt$34 and today trading around $33
Initial cost of the trade $3.5 for FEB/MAY 30 Put cal
Profit $1.3 for a return 37% in six weeks...showing the power and elegance of options...even when your wrong you can make money!
Over the weekend there was an article in Barron's talking about the high premium in the Jan 90 calls...by the tone of the article I figured RMBS would be up strongly and it was. I left a lot of cash on the table so the MM's will have a nice dinner...sold the spread for $1.85. Net profit (after deducting the remaining .55 debt) is $1.30 per contract.
Not bad since I put the trade on 1/24 the stock was at abt$34 and today trading around $33
Initial cost of the trade $3.5 for FEB/MAY 30 Put cal
Profit $1.3 for a return 37% in six weeks...showing the power and elegance of options...even when your wrong you can make money!
After doing a lot of digging & playing out different scenario's I will most certainly close out my LEAP after my MAR option's expire (hopefully worthless)
I do like the idea of buying the APR/JUN after next friday & roll it to May. This is essentially the same thing I'm doing with my LEAP now, but with significantly less money (& risk) tied up in the trade & a much greater profit percentage possible.
Thanks for pointing me in the right direction.