ok...I get it...your doing it as a straddle/cal but if it is a reverse arn't you looking for IV greater in the back month?
so pretty much as described...looking for news or anticipating earnings/news whatever then bang your on it late in trading with the expectation of drop in IV of the front month but not as much in back month then next day? Thanks IV_Trader ....but are you doing this as a retail trader or pro/prop?
Retail. It's a bit more complex that what you described above , but basically very close. I do it a little different from how Mav describing it in his posts , especially when it's comes to "times to exp" , I almost never put RC if time>15d.
Reverse Calendar , just like your trade on TASR ( personally , I don't think it's a good R/R trade) ; buying front month , selling back month on the same strike
So do you run scan's that look for earnings...etc or looks for changing vol? do you ever do diag? Why don't you like the RR for TASR....btw thanks again!
Hi IV, I found the trade http://www.elitetrader.com/vb/showthread.php?s=&threadid=61937&perpage=6&pagenumber=11 It is a nice trade. I still have something I don't understand. When you put on RC with time < 15d, would the theta effect on your RC more than usual ? Also, you don't do multimonths RC such as Mar/Sep but something like Mar/April. What's the reason ? Thanks
Thx for finding the thread Nick..I remember it..hey IV_Trader plz feel free to post any RC's you might do coming up. Your style of trading does't really lend itself to real time posting and all the follow-up required but anything you have to contribute will be much appreciated. One main question I have is WHAT was the primary criteria in doing a RC, Vs a combo or strangle? tia donna
shakan : ideally , you want your both (long and short) option's premium to be the same next day. If large move in stock occurs , they both might be at zero or , let's day at 10$(very deep ITM), this way you are keeping the most of the premium received. The lesser time left for exp , the more odds for this to happens if stock does move. Donna , I'm using puts (or calls) only.
Update on Calendars in play: WFMI frustrating...a winning play that has become difficult to manage-down again today the March 70 short put is close to no extrensic value left leaving me vulnerable to getting put to so decided to roll and ratio. BTC Mar WFMI 70p- (10contracts)net debt $7.20 per contract STO Mar WFMI 65p- (20 contracts) at credit $2.70 soooo I've increased my risk and still have net debt of $1800 (total) I did roll UP the May 72p to April 70 for a net credit of $2.60 position now is Mar/Apr diag 65(20contracts)/70 (10contracts)puts RMBS- rolled up May30p to April30p for a net credit of 1.10 holding Mar/Apr 30 put cal. SHLD no change