Long Iron Condor or Call calendar ?

[pengw]

Apple is at 164.75 today and you think apple will stay between 160 ad 170 until Aug opt expires. ( 17 days to go ) So you want to find sme options strategies to profit from it.

Two low risk/high award options stategy that fits in will be Iron Condor and Call Calendar Spread.

Both has simliar risk profile at exp date but look inside the greeks, they are quite diferent.

Iron Condor is a short vega and long theta, near delta neutral ( a little more negative ) position
while call calendar Spread is long vega ad long theta and near delta neutral ( a little more positive ) position.

What this means is that both positios profit from time decay. but Iron Condor will lose money if IV jumps before exp while Call Calendar will gain if IV jumps. If you plan to hold your position until the exp. date, the different won't matter. But if you change your mind before exp. date. it matters a lot.

You might get all those data easily by checking the full risk profile in the Options Lab at http://www.TheOptionsLab.com

Here is a quick start,

1. Login, then enter 'aapl', click on Update
2. Select 'Long Iron Condor', watch carefull the Totals Vega and Theta, adjust Days and Volatlity to see how they change.
3. The Select 'Call calendar Spread', watch carefull the Totals Vega and Theta, adjust Days and Volatlity to see how they change.

Stay tune !

 

[Pinozi]

Has anyone here had much experience in applying both strategies at the same time?

Im not familiar with Apple but Ive done strategies where Im long some ATM calendars but offset with some ATM butterflies or Iron Condors to neutralise vega - as with most delta neutral stuff the key is the planning and timing of adjustments

Just wanted to hopefully start some conversation around this topic

 

[pengw]

I have not traded both at same time so only my concerns, not comments are raised here :-}

In your case, wouldn't the exposure to underlying movement be too much, even both are supposed to be delta neutral ? As you know the total delta will never be zero.

With 5 to 6 legs to handle, the loss from bid/ask spread will eat some of the profit, let alone the commissions.

 

[dagnyt]

Quote from pengw:


Stay tune !

What are you trying to do here?

You are providing incomplete information. And your information is incorrect. Why are you doing that.

One Example;
"Iron Condor is a short vega and long theta, near delta neutral ( a little more negative ) position
while call calendar Spread is long vega ad long theta and near delta neutral ( a little more positive ) position."

WHY is an iron condor 'a little more negative' delta?

It's not. It depends on which strike prices you choose. There is no definition of an iron condor that requires that both the call spread and put spread be equidistant from the current stock price.

Why is the call calendar spread a little more positive on delta? It's not. If you choose an ITM call spread, then the delta of your long is LESS than the delta of your short and the spread is short delta.

It difficult enough to have bad information spread intentionally. But when someone like you is trying to help and just makes things more confusing for everyone, you are doing a great disservice to this board.

Please be more careful.

Mark

 

[pengw]

Mark,

Thanks for mentioning this.

I agree that both Calendar and condor positions are supposed to be done as delta neutral spread.

Regards

 

[Pinozi]

Quote from pengw:

I have not traded both at same time so only my concerns, not comments are raised here :-}

In your case, wouldn't the exposure to underlying movement be too much, even both are supposed to be delta neutral ? As you know the total delta will never be zero.

With 5 to 6 legs to handle, the loss from bid/ask spread will eat some of the profit, let alone the commissions.

I understand all those shortfalls - this is something I would only suggest to traders with a bit more capital at their disposal

 

[pengw]

Actually, I like the idea because very likely the risk/reward ratio will be the same when you combine those two strategies. I just don't like the fact that so many legs are involved.

Regards

 

[atticus]

Quote from pengw:

What this means is that both positios profit from time decay. but Iron Condor will lose money if IV jumps before exp while Call Calendar will gain if IV jumps. If you plan to hold your position until the exp. date, the different won't matter. But if you change your mind before exp. date. it matters a lot.

Your vega increases on the calendar as you approach expiration. The vega/premium is much higher on the calendar, so the difference is profound at expiration. An expiring calendar is essentially a pure-vega play, while the vega on the expiring condor (if trading near-neutrality) is nominal.

 

[Pinozi]

Quote from atticus:

Your vega increases on the calendar as you approach expiration. The vega/premium is much higher on the calendar, so the difference is profound at expiration. An expiring calendar is essentially a pure-vega play, while the vega on the expiring condor (if trading near-neutrality) is nominal.

Yes, I learned this through trial and error

Its one of the reasons why I tend to close my calendar spreads earlier than any condors to try and minimise risk. It is sweet though at times when you have a double calendar going and price is between the two strikes, its fun squeezing out the gains and holding as close to expiry as possible in that situation

 

[dagnyt]

Quote from Pinozi:

its fun squeezing out the gains and holding as close to expiry as possible in that situation

Just asking: How much fun is it when the stock gaps through one of the strikes?

Mark