Calendar secrets :-)

How does one buy a long put? Is that the same as selling a short call? I ask merely for information.

 

Buying a Long option (Call or Put) is very similar to buying a Long Stock.
One just has to fill some more data fields like the expiration date and strike.
Long Put is different from Short Call, though both are bearish.

 

I was picking on the redundant language. Should just say buy put. You can't sell a long put. You just sell a put.

Just as you cannot buy a long stock. You simply buy the stock, then you are long IN the stock.

 

Ok. my bad, didn't read the full thread...

 

Really simple. You buy a put. You now have a long put. Your neighbor hears about your options prowess -- but doesn't have an options account -- and makes a deal to buy the put from you on the off-the-books side market. Your neighbor has now bought a long put and is now long a long put.

And you thought it couldn't be done.

 

Can I be short a long put? Can I be short a short call? You do know I am just messing with the nomenclature, right? I was just nickpicking?

 

If that’s how you feel, I’m okay with it. It’s no skin off my back.

 

For an easy understanding of the topic in this thread:

See these two postings for the example data set for the said 2-leg Put spread:
https://www.elitetrader.com/et/threads/calendar-secrets.369662/page-2#post-5676557
https://www.elitetrader.com/et/threads/calendar-secrets.369662/page-3#post-5676615

A quick proof ot the claimed discovery:

Assume Spot and IV stay the same at expiration like they were at entry.
Then, a LongPut will be worth $0 at expiration.
But now assume using a LongPut with a longer DTE instead. Ie. normal DTE is 60, and we use now a longer DTE 90 for the LongPut.
But still we will close the whole position on the shorter DTE 60.
Now comes the interesting part:
At the expiration of the ShortPut (ie. after 60 days) the LongPut (that did cost us 22.8528) will be worth 11.6485 (b/c it has another 30 days till its own expiration):
Pr_at_SP_expiry=11.6485 Net_Pr=11.6485 Used_Pr=11.2043 Pr_for_SP_DTE=18.0278 Saved_LP_Pr=6.8235(37.85%))

Ie. normally using a DTE 60 LongPut would have costed 18.0278, but using DTE 90 instead costs us in the same time only 11.2043. This is 37.85% cheaper than normal (18.0278). Ie. we save that much Premium for the LongPut side of the spread. And this saving of courses reduces our cost basis, which then of course means increasing the PnL%.

Q.E.D.

PS: the calculation above is even a pessimistic one, meanng in reality the broker system recognizes (understands) that it's a spread and reduces the margin accordingly, which then of course means even higher PnL% than in the above calc.

 

Drop the vol in the calendar to 100% at day 60 and see what happens. You are such a clown.

 

This is a different situation.
You cannot make such arbitrary adjustments in such comparisons.
And: a higher LongPut IV instead then gives a higher PnL%. So what?