Pl. look at the attachments in my last two posts at: http://www.elitetrader.com/vb/showthread.php?s=&threadid=127805&perpage=6&pagenumber=18
Why do people talk in terms of: 1. a credit spread. I do not like it, as it is not complete, and the same thing can be done with a debit spread (change calls to puts). 2. In calendars, why do people specify a call and a put? It is meaningless. It is only the strike that matters (and cost of carry). If later positive operate with puts. If negative calls.
I respectfully disagree with you regarding calls versus puts on calendars. While *in theory* they're the same, in practice they're not. You can usually get a better risk/reward on put calendars than call. This is due to higher IV.
I think I know what you mean, but we are talking rather about when a strike is determined, do you build it with put or with calls? You seem to think in terms of strike choice (above or below ATM).
I may not have fully grokked where the thread was going, but if you have to choose calls versus puts for an ATM calendar, puts usually give the best risk/reward.
I think there has been a little confusion here. The credit spread mentioned was adding a bear call spread to an existing calendar spread which has been called the monkey calendar There is also no difference from calendar spreads being constructed with all calls or all puts, but due to the skew puts are better in practice. I just illustrated the examples with both calls and puts to show the similarities and differences of the DC and DD
For the same strike how can there be a "skew" (between quote as I think you mean it not in the usual way I use the term) between the call and the put for same strike and expiration? I think we may be discussing not the same thing.
RFT: As Pinozi mentioned, this was in reference to the question on how to cut the vega risk, and the link referenced to the thread cdowis started. There is no bias or preference. Pinozi: thanks
Have a look at most option chains on pretty much anything, puts usually have a higher IV than calls for the same strike and expiry. This is due to the greater fear of the market going down than up, which is why there is a price difference This page explains it much better than I can http://www.optionistics.com/i/volatility_skew