Is there a credit spread equivalent or synthetic of a calendar spread?

[Pinozi]

This question arises from me lodging stock to trade options - obviously when I do this I can only do strategies where I receive a credit.

This means I'm limited to things like bull put spreads, bear call spreads, iron condors, iron butterflies etc

I love trading calendars too and just wondering if there was an equivalent or synthetic of the calendar spread?

Cheers

Pinozi

 

[spindr0]

Quote from Pinozi:

This question arises from me lodging stock to trade options - obviously when I do this I can only do strategies where I receive a credit.

This means I'm limited to things like bull put spreads, bear call spreads, iron condors, iron butterflies etc

I love trading calendars too and just wondering if there was an equivalent or synthetic of the calendar spread?

What is lodging stock to trade options? And how is a credit received a limitation?

Any synthetic equivalent to one leg of the calendar (combined with the other) would give you an equivalent but it involves more legs and therefore is less efficient (more slippage and comissions).

 

[rew]

Quote from Pinozi:

This question arises from me lodging stock to trade options - obviously when I do this I can only do strategies where I receive a credit.

This means I'm limited to things like bull put spreads, bear call spreads, iron condors, iron butterflies etc

I love trading calendars too and just wondering if there was an equivalent or synthetic of the calendar spread?

Cheers

Pinozi

I also have no idea what lodging stock to trade options means.

But the synthetic equivalent of a call calendar spread is the put calendar spread at the same strike price and expiration months. And vice versa.

 

[mushinseeker]

I guess you can sell a front month put and short stock to create a front month short and buy the back month call making the entire package a credit BUT there is probably little or no edge to it unless the put/call parity is off for some strange reason.

 

[Pinozi]

I trade ASX options and stock. Here in the land downunder you can lodge stock with the ACH (Australian Clearing House) to cover any margin required for any options trading. They do give the stock you lodge as collateral a 30% haircut for and top 200 ASX stock

So lets say you trade a credit put spread and you need $7000 margin to hold the position then you can either have $7000 cash in your account or lodge $10000 of top 200 ASX stock with the ACH

Risks are still the same and you'll have to sell your stock or front cash if the trade loses but I think its a better way to use your stock rather than just doing just covered calls

So lets say I'm bullish a stock which has exchange traded options on it, I can't trade a debit call spread but can do the equivalent credit put spread

So back to my original question - is there an equivalent credit spread to a debit calendar spread?

 

[Pinozi]

Quote from MushinSeeker:

I guess you can sell a front month put and short stock to create a front month short and buy the back month call making the entire package a credit BUT there is probably little or no edge to it unless the put/call parity is off for some strange reason.

I know there is no edge to the strategy - please see my response as to why I'm asking the question

Yes, I thought you would have to have some stock in the synthetic so this wouldn't be practical

 

[sonoma]

Quote from Pinozi:

I can't trade a debit call spread but can do the equivalent credit put spread

Remind us why can't you buy the long vertical?

 

[Pinozi]

Quote from sonoma:

Remind us why can't you buy the long vertical?

I should've made it a little clearer - my example is for an account with stock only - no cash.

So I can't go and do debit strategies with my account as the cupboard is bare, but I can do credit strategies and lodge stock to cover the margin required

 

[sonoma]

Quote from Pinozi:

I should've made it a little clearer - my example is for an account with stock only - no cash.

So I can't go and do debit strategies with my account as the cupboard is bare, but I can do credit strategies and lodge stock to cover the margin required

Can you give us some insight about what you want to accomplish by adding the calendar equivalent?

 

[spindr0]

Quote from Pinozi:

I should've made it a little clearer - my example is for an account with stock only - no cash.

So I can't go and do debit strategies with my account as the cupboard is bare, but I can do credit strategies and lodge stock to cover the margin required

OK, lodging stock is what we call margin. gotcha.

MushinSeeker gave you the answer but perhaps it wasn't clear. If you want to do a synthetic calendar for a credit, you're going to have to short stock.

From a conversion formula, ignoring dividends and carry cost:

S + P = C
or
-S -P = -C

So shorting stock and selling a put is the same as a short call.

For example, you want to do a Nov/Dec 50c calendar. That's a debit transaction since the Dec call costs more than Nov. Since yer broke, you can't do thast . So you would short the stock, sell the Nov 50p and buy the Dec 50c.

Now it's just a question of if you have a good lodge to stay in