The Monkey Calendar

Quote from mysticman:

1. Some of your statements are puzzling to me, so I have to ask what you are doing. Perhaps you can clarify. You don't like ICs, but you plan on having one in this trade by legging in if the market goes down. So do you now like ICs if they are in combination with a calendar?

2. It would make sense to me, if you wanted to combine a calendar with an IC, that the IC be out of the money. You have a good start on this where you are with the call leg now. However, it does not make sense to me to put the calendar also OTM, but rather ATM or where you think the stock is going. Perhaps this trade is not your ideal structure since you didn't start with the calendar, but like I said the calendar is an expensive way to hedge and now sits right on top of the short vertical. Weird. So what is your master plan or ideal position?

If you think that IBM is headed down then the calendar should have been at the 125 strike and you could have hedged the short vertical in many other simpler ways. But since you plan to keep the calendar there, it has become more than a weekend hedge. Taking your words at face value, the calendar is now a permanent part of the position So now if IBM goes down according to your plan, you will not make money and instead it will be only an opportunity to establish the put leg of the IC.

3. So then you will have an IC that happens to have a calendar sitting up at the top leg. That doesn't make sense to me. Tell me again how you like calendars and don't like ICs.
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1. I will place an IC only if it is legged in. The calendar can serve as a hedge against the naked leg. Eventually I have a combo of IC and calendar.

2. In the final position, the calendar becomes the basic position. The IC is just a hedge against vega and gives me more profit. I hate the IC, and the final position is not a pure IC, but something else.

I agree that that the calendar position is abit "funky" here. As I said, it is not the monkey calendar. I saw a topping pattern, and did a test position to see how it works out as the market falls. Also, I would have waited on the calendar, but I put the vertical on Friday, so I decided to hedge it.

Normally I would have waited to see where to place the calendar after the market moved down, and I completed the IC.

3. I agree that the the calendar is poorly placed, but the general strategy makes sense to me.
 
Quote from mysticman:

However... according to cdowis at the start of this thread his calendar is not supposed to be at the same strike as the short vertical. Otherwise the "monkey" has no tail. Why not put the calendar ATM 130 strike? This gives a greater theta and less vega. It also gives it more downside delta, but he says that his directional bias is down so that too should be desireable.
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It is not a monkey calendar, but, as I said, I just threw it into this thread.

Basically I saw an opportunity to leg into an IC, and the calendar ended up hedging the vertical, rather than the reverse.
 
If I understand your plan for SPY correctly, it was to be short the call spread, and the calendar was placed simply to hedge over the weekend. I don't think the calendar is such a good short term hedge. Even if the underlying moved to your calendar's short strike, the delta gains would be small, and the vega losses on the SPY would result in a small if any gain at all on the calendar. Your short call vertical is already a hedged position, adding the calendar didn't help short term. On the other hand, for the monkey calendar play the calendar works as a reasonable hedge because you plan to let the position play out over a few weeks.

ST
 
This is an IBM trade -- not SPY. You seem to be saying that the calendar is not a good short term hedge but is a good long term hedge. I don't know whether that is true, or if it is true whether it would also be true for a half-dozen other hedge positions. The thing about hedges is that when you put them on, you want them to work right away, not in a couple of weeks. I too thought that it was only for the weekend, but it turns out not so.

If he had simply left his short vertical alone and had faith in his analysis, he would be making lots of money after yesterday's drop. Now with the calendar mucking up the position, he is probably losing money. This would be a good time to open an ATM calendar, the put leg of the IC, or both.
 
Quote from ajna:

>If I understand your plan for SPY correctly,

IBM

> it was to be short the call spread, and the calendar was placed simply to hedge over the weekend. I don't think the calendar is such a good short term hedge.

I agree. The calendar is a long term position. Basically I am legging into an iron condor, using the calendar as a hedge against the first position. I intend to keep the calendar as a long term position.

> Even if the underlying moved to your calendar's short strike, the delta gains would be small, and the vega losses on the SPY would result in a small if any gain at all on the calendar.

I agree that my calendar may have been placed in a better position. But the general strategy is sound.

I am hedging delta and vega risk by combining the vertical and calendar.

>Your short call vertical is already a hedged position, adding the calendar didn't help short term.

Legging into a condor is a losing strategy unless you are VERY good at guessing market turns. I ran the analysis, and adding the calendar seems to act very much like a diagonal, which is superior in my mind to a "naked" vertical.

And I intended to add a calendar as part of the basic position anyway. Just a matter of when and where.

> On the other hand, for the monkey calendar play the calendar works as a reasonable hedge because you plan to let the position play out over a few weeks.

Yep, this is a long term strategy.
 
Quote from mysticman:

>If he had simply left his short vertical alone and had faith in his analysis, he would be making lots of money after yesterday's drop.

What if the market had made a sharp move up? You would be singing my praises, that I was a genius. The market pretty much does what it is going to do, and ignores my analysis.

My trading plan is to hedge gamma risk, and rarely do I make money on it.

> Now with the calendar mucking up the position, he is probably losing money. This would be a good time to open an ATM calendar, the put leg of the IC, or both.

Actually, I am pretty much at breakeven, as I planned. The slight increase in volty, making profit on the vertical, that helps compensate in the calendar. The PL curve is pretty flat -- low delta and gamma.

As you mentioned, I intend to place the put side of the Iron Condor, and let theta do its magic.
 
Closed the vertical on the RUT trade. It was bleeding pretty badly. I need to look closer at that trade. The calendar is doing fine.

The IBM is holding its own. May go down abit more, so waiting to see if I want to place the put side of the vertical or just leave it alone.
 
An update on the IBM position after the big bear move.

It is doing well. The loss curve at this point is very flat for a continued down move, while a up move brings me profit.

I can pretty much leave it alone.

I got chicken on my RUT, when it started going up, and got out of the vertical. But the calendar was making money on the down move towards my short strike, and volty went up.

Just a standard calendar.
 
You must be drinking some kind of potent juice to think that your IBM 135 put calendar is profitable. You put it on for a 3.40 debit (if you were lucky) on 5/30 and it is now worth 2.40. Wake up. You have lost at least $1 or about 30%. You should have adjusted it days ago.

If you had taken my suggestion for opening another calendar at the 125 strike you would be rolling in money.

You think you hedge gamma? Wake up again. With your long-dated options you have practically no gamma risk in your position.
 
Clodis , close this thread and open a new one. Outline proposed position. Show how/why this particular position will have the best/better r/r if you are right on future price or vols directions. Your replies like “we shell see” are thread’s killers…not too much left to argue or add from this point.
Good luck with your current trade
 
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