Wow! I just found this calendar thread (thanks to gatorplease for setting it up and rdemyan for emailing me the link). I know what I'll be reading tomorrow!
I'd second that motion..I've traded PFE a few times and it does seem to be a good value candidate are you looking at a call or put calendar?
Murray, thanks for posting this. I only got around to looking at it today. I'm looking at: 1) Calendars on indexes 2) Using cals to make my overall position as vega-positive as possible 3) Double cals (what you call M trade, I think) 4) Ratioing M trades I've dabbled with double diags but have come to the conclusion that I'm going to hold off until I get a better handle on calendars.
Murray, I went through the examples in detail. On the diagonal, you had the farther OTM strike in the near month. I'm used to seeing it the other way around, but I think you wanted the position to suit a bullish scenario. I'm looking at calendars on SPX. I'm wondering if you or anyone ever does these? The near month vol is almost always less than the far month. What I'm looking at is a bearish scenario sometime between now and MAR06. Here are two OTM put calendars: 1) Calendar Trade #1 SPX DEC/MAR 1150 put Breakeven is 1090 to 1230 2) Calendar Trade #2 SPX DEC/MAR 1200 put SPX DEC/MAR 1125 Breakeven is 1090 to 1240
Here's a Cal strategy I'm considering. I'm looking at MATK (thanks JD) which is in a l/t downtrend. It closed Friday at $26.37. I'm thinking of selling the DEC 20P @ .30 and buying the JAN 20P for .55 (today's prices) for a net debit of .25. The thought is if MATK continues it's downtrend by DEC exp the DEC Put will expire worthless and the JAN Put can be sold for more than the .25 Debit. Feel free to criticize and abuse me as warrented.
No criticism. WHY is matk going down? What are the fundamentals driving this play? It seems like a reasonable position, but we need to research the position.
Andy, I've never done Calendar spreads on an index. I like to use volatility in the trade... and individual securities rise in volatility much faster than an index. I much prefer Put Calendar... and do about 4 times as many than those of Call Calendars. Call Calendars... just don't give you that win-win scenario... with volatiilty and movement. OTM Put Calendars are great strategies.... if the security goes your way. Of course... isn't every strategy good if it goes your way... but I will say... you really like the Put Calendar if it goes your way... great reward potential. Murray
While I've got a couple of very good systems to trade long, I've never been good at picking downtrending stocks. What is your approach to identifying candidates for put calendars? Do you use TA? Do you look for front-month vol skews? Thanks Murray!
Andy, Track the indexes.... PPH, SOX, OIH, HHH, SMH, etc. When they turn over (bearish)... you sort the secuties within that index and begin your TA and fundamental. The trend is your friend. You're just playing the trend with the worse in the group. Just the opposite of Call Calendars... when you play the best in the group with an positive index trend. M~
Murray, Yes, I do a relative strength ranking of all the sector ETFs each Friday. When the overall market is trending up, I look at the strongest two or three sectors. Then I look at the charts of the stocks in the strongest sectors. Works well in an up trend. However, doing the opposite in a downtrend is not nearly as good, I've found....