Quote from MTE:
In which month? The expiring one?
yeh, in atticus's favorite month where options expire on Tuesday (g). OK, sorry. Couldn't resist that one. Yep, expiring options.
I'd say that in the expiring month the IV is not important as it is all about gamma on expiration day. IV just reacts to the moves in the underlying. For example, in the morning there's still plenty of time for the stock to make a move and for the options to expire ITM, and as we get closer to the end of day the last bits of premium get sucked out as it becomes fairly certain which options will expire ITM/OTM. OK, now that I've expressed my opinion, I'm gonna look up and read this article.
Obviously I gave the article short shrift. There are more details and maybe it's all a lot of BS... or not.
It reminded me of some posts about reverse spreads that I read about on Yahoo 4, maybe 5 years ago, by some know-it-all trader named born29. I said "WTF?" to myself since I vaguely recalled a 2-3 paragraph blurb about them that I read 20+ years ago in McMillan's tome. McMillan panned them, writing that "No serious strategist employs this strategy by itself as a profit making vehicle. For some reason, the strategy often appeals to the novice as "something to try," and is being included here as something not to try.
HAH! I knew it! Born29 was a novice trader! I had him in my sights, right where I wanted him!!!
Getting back to reverse calendars... Unfortunately, since it's an expiration week strategy, it took a few months to see if the strategy had any realistic possibilities. Working with another wannabe Yahoo expert (g), we realized that given the right set up, it was indeed quite viable for EA's the last week before expiration. Soooo, it turns out that born again guy really knew what * I * was talking about (big wink). And maybe, this expiration day strategy in SFO also has a place in the playbook. It may take a few months to figure that out.
If you read the article, I'd appreciate your take on it.
Spin
