Convertible Double calendar strangle

Discussion in 'Options' started by zmostatabi, Nov 13, 2005.

  1. 11-13-05 05:08 PM

    I call my strategy Convertible Double calendar strangle.. a little confusing but it is very simple... this strategy in the beginning is non-directional but as market shows some behavior and direction then I adjust my position accordingly.

    Here the way I play the game:
    1. I scan the market for those underlying equities that has tight BB i.e. low historical volatility and make sure that IV is less than HV
    2. Strangle the underlying equity at least for four months (giving ourselves enough time for breakout either way)
    3. There is a time decay involved which is about 12% every month. to compensate that I convert part of my position to calendar..selling 3 lot will take care of it, if you start with 10 lots
    4. Here is the time that I have to be patient and wait for breakout ....this is usually happens and when one side moving from OTM to ITM then I convert my Strangle to Straddle to protect all the gain due to current movement..if you think it is too much adjustment you can ignore partial calendar
    5. From here you make your position double diagonal meaning selling call and put one strike above your recent straddle strike price.

    P. S. there is always an exception to the rule that comes with the creativity of traders because as you are aware, market is non-linear animal.. and has to be treated differenly as behaved.
  2. ckor30

    ckor30 Guest

    Would you like to show us an example?