Registered: Aug 2011
Posts: 3514

i'm just wondering if anyone has any experience with this kind of trade.
basically

short one longer term atm/ntm option
long two shorter term same strike option

at the short term expiration you would need to adjust to cover the short.. i imagine.. I don't know.. does anyone have any experience with calender backspreads? or time spreads in any respect in a way to exploit big moves and not get beat by time decay or at least mitigate the risk.. or just any thoughts in general to spreading risk across the calender..

Registered: Aug 2011
Posts: 392

I would post a real example, then we can see what your have in mind.

Registered: Aug 2011
Posts: 3514

OK I had one in mind but as I looked at it more it didn't make sense with what the underlying would have to do to make sense of it... I need to graph smiles over he Calender for some different securitys and see if any ideas come up

Registered: Aug 2011
Posts: 3514

-1 GS 2013 JAN 90.00 CALL 18.50
+4 GS 2012 OCT 105.00 CALL 5.05

margin.. difference between strikes for one call spread 1500
theoretically unlimited upside profit
downside doesn't start really reducing losses untill below 60 attached is profit graph

Total Cost: $170.00

So i'm short the jan 100 call, long 4 oct 105 calls..

profit graph looks pretty decent.. you tell me what you think.. and what does one do to manage this trade at least at expiration where you end up short one call

gs calender ratio backspread.png
This has been downloaded 42 time(s).

Registered: Aug 2011
Posts: 3514

-1 GS 2012 OCT 105.00 CALL 2.73
+2 GS 2012 AUG 105.00 CALL 1.11


Current Stock Price : $97.68
Break Even #1 : $90.86
Break Even #2 : $107.94

Total Cost: ($51.00)
Max Risk: $420.00
% Max Risk: 823.5%
Max Profit: Infinite

ps i like this a little better , less potiential risk.. less downside if the stock keeps going down, and plenty of upside!

gs calender ratio backspread front month.png
This has been downloaded 34 time(s).

Registered: Aug 2011
Posts: 3514

-1 GS 2013 JAN 95.00 CALL 9.55
+10 GS 2012 AUG 105.00 CALL 1.11


Current Stock Price : $97.68
Break Even : $106.65

Total Cost: $155.00
Monetary Requirement: $1,000.00
Total Requirement: $1,155.00
Put Guarantee Price: $0.00
Max Risk: $1,535.00
% Max Risk: 132.9%
Max Profit: Infinite

gs calender.png
This has been downloaded 36 time(s).

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