Donna, In order to earn time premium (+positive theta) there is always a tradeoff in the wonderful world of options. I'm earning roughly 30 bucks a day for sitting on my rear-end. The tradeoff is gamma exposure. I typically like to roll short options about a week before expiry because gamma risk is too high for my liking in that final week.
I see what u mean donna about your greeks, forget that last post. I'm not sure why my gamma exposure is much greater than your example. I see you're earning decent theta w/o a large gamma exposure. I'm afraid greek is not my native tongue, I'm polish for cryin' out loud
I now have two Feb/May cal's going and decided to update as both are now ITM WFMI 72.5 Feb/May currently stock is 71.50 and RMBS is 27.19 as I've been trying to formulate guidelines for trading on calendars need to look for 1) initial credit of abt 1/3 2)vols on near term higher than vols on back month on both accounts I forgot to even look....whoops... the only thing I got was good direction Now however with only two weeks remaining before expiration I need to be careful of having the shorts PUT to me. There is still about 2$ of time value in WFMI so not worried this next week but RMBS is so vol that I might get put at least some of the 10 contracts I have on it. I also need to think abt whether I need to roll down for March...no choice in WFMI as there are no 72.5 strikes but if I roll down to 25 for RMBS I am changing the "character" of the cal.
The other thing I'm learning about Cal's...its the "watching paint dry" category of options trading. While everyone else was on the rollercoaster of GOOG last week I was bored as heck!
Lol! Love the 'paint dry' comment. It's like the pro golfer. Instead of hitting the ball a bazillion yards and up under trees and hazards, the guy on t.v. is soooo boring, hitting the ball down the middle every time, middle of the green. zzzzzzz, yet those are the guys on t.v., and the best in the world. ok, it's a strech, but it gets me through the day. I'm leaving my 3 strike BMC calendar alone until after earnings, rolling short strikes by next friday-ish. Some guidelines I like to filter for calendars are as follows: 1. find stocks that are under 30 Implied Vol. 2. get at least .50 for short strike 3. if front month IV is 6 points greater than far month, intuition tells me to avoid cal altogether(i'm guessing earnings, fda announcement,upgrade/downgrade is imminent)(gap risk) 4. Look to 'go diagonal' if IV rises(diagonals don't get slammed as much as a pure calendar does when iv comes down) I also recently put on a JCP double diagonal. Maybe that should be another thread. I sold the Mar 50-60 strangle, and bot the May 47.5-62.5 strangle. I usually like to sell front month strangle 1 standard deviation and find candidates w/ IV in bottom third of 2 yr range. Then I buy the next available 'outside' strike and 1 or 2 months further as well for roll opportunity. If stock moves outside 1 sd within 2 weeks, i'll close at a loss, or turn the position into a 'carnival spread' (multi-strike big top tent lookin' thing).
Darn. Wrong thread. Sorry. I was thinking of different calendar spreads. http://vikingphoenix.com/store/calendars/classicpinups.htm Carry on.