Calendars on Q's

Discussion in 'Options' started by jdoucet, Aug 24, 2006.

  1. zxcv1fu

    zxcv1fu

    primary sell premium with limited risk:

    http://www.redoption.com/

    iron condor
    unbalanced IC
    calendar spread
    diagonal
    double diagonal
    butterfly
    unbalanced butterfly
    straddles/strangles swap
    pair trade
     
    #11     Aug 24, 2006
  2. my bad, i thought you said "profitable institutional style trading".
     
    #12     Aug 25, 2006
  3. zxcv1fu

    zxcv1fu

    Those r the style & I intend to make profit:D
     
    #13     Aug 25, 2006
  4. Red option does pair trading?

    I'll have to go search it out.

    I just signed up for their equity calendar service.
     
    #14     Aug 25, 2006
  5. jdoucet

    jdoucet

    I sell a lot of iron condors and have been very profitable with it. I've stayed mainly with SPYders lately though as I find that a lot safer than dealing with individual stocks. I've been burned a few times with Google and others like it. I guess you live and learn...mistakes hopefully not to be repeated :) I now want to try my hand at Calendar spreads though.
     
    #15     Aug 25, 2006
  6. The ratio vertical spread is hurt by IV, the short butterfly is hurt by time passage, but the long time spread benefits from both.

    Short the very next expiring month, long the 90days+ option at the same strike. Go ATM or slightly OTM.

    You really make the money in the last 3 weeks so you can start it around then. Given this fact, I like the ES/EW contracts since they are liquid and provide expiration dates every 2 weeks. Also the European futures options SPAN means less margin and no chance of early exercise. On top of that I can buy/sell these all day without getting T-regged since they are futures, not stocks. Just use the options based on the same futures contract.

    Carefully watch your net delta and gamma risk day to day, especially in the final days. Take off the position or adjust it.

    After some movement, you can adjust your delta, gamma risk by:

    a. adding another calendar at the next strike, a neutral position

    b. rolling the short strike to convert to a diagonal and a bullish/bearish position

    c. If the market really takes off, you can just close a leg and keep a directional strategy.

    Also, you can buy the long option several months out and keep selling near month contracts against it. Bottom line is trying to minimize the net delta position, watch your gamma risk and breakeven points on your option spread graph. Time decay is a sure thing; if you keep your gamma risk down then you have the time to get out or adjust

    Try out both the call and put calendar and choose the more favorable r/r & pricing scenarios. You can also compare buying the spread slightly OTM.

    I think the time spread is the perfect spread to get into at the beginning of a consolidation. You can collect the time premium while the market sits on the pot then convert it if significant movement returns.

    Anyway I'm just trying to help out and not an expert either.

    Best of luck.
     
    #16     Aug 25, 2006
  7. Excellent suggestions, although IV hurting the ratio spread depends on which way IV is going. It could help it also. Same applies to the time spread, so I assume you don't do these when IV is high.

    So do you sell options every two weeks, both ES and EW?

    Could you give an example of "adding another calendar at the next strike"?
     
    #17     Aug 26, 2006
  8. xt , those all are trade ofs and additional "adjustments" are just a new , stand alone trades (with their own odds and probs). You must be right on direction or vols to make calendars a winners.
    Good luck
     
    #18     Aug 26, 2006
  9. thx IV; to mystic - from the option spread graph, simulate a calendar at two adjacent strikes to evaluate the spread price over time. It basically widens the breakeven points at less overall r/r.
     
    #19     Aug 27, 2006
  10. Yes I agree with that but this is a double calendar position that is directly shown in a P&L graph.
    "r/r" is ambiguous. You must mean risk to reward.

    So what about those ES and EW options? Have you tried selling those every two weeks?
     
    #20     Aug 27, 2006