Calendar in High IV Environment

Discussion in 'Options' started by mannywong, Dec 13, 2008.

  1. mannywong

    mannywong

    Hi, im thinking one calendar idea in high IV environment (let us say back to Oct):

    Both s-t and l-t vol surge in Oct, some traders are selling s-t (Say Nov) and buying l-t (Say Mar), but does it really work in such choppy market (everyday move up and down like hell).

    What im thinking is opposite: selling l-t to be short vega, while buying s-t to hedge the gamma short (overall positon: vega short and gamma slightly long or at least not gamma short) in the meantime make delta neutral when entering the position. So when entering the position, we dont have to be exactly 1 to 1 (buy 1 s-t and short 1 l-t)

    What do you guys think of this? Any comments are welcome
     
  2. spindr0

    spindr0

    For a reverse calendar to work, you need some combination of move away from from the strike and IV contraction. Without one, you need more of the other to become profitable. If IV expands, you got trouble.
     
  3. mktmkr

    mktmkr

    if you want to play the sort vol side...think of selling iron condors