Is that 25/25 the SPY DEC 85P/SEP 85P spread? When I look at the prices, I see the 25/25 as much cheaper than the 50/40 SPY DEC 75P/SEP 75P spread. Using the closing prices, the 25/25 costs $2,700 and the 50/40 costs $3,570 at midpoint prices.
Hi Premium, It was a ES 800 March-Oct that I had setup already in Hoadley that just happened to be within $25 of total cost so used. it. I will plug in SPY one and let you know, with Dec-Sep and whether 17th or 31st. My 50-40 did super today, a 15% gain on first day on about 1.5% drop, what was looking for. Put on a 800 Calendar/Diag SPY today, a mistake but saw timing as important and did it ASAP. Timing was right but should have just increased size on existing 50-40. It was a 10 long Spy Dec 31 80P, shrt 9 Sep 30 78P for net cost of 1.02 not counting the one less Sep. Cost $1,070 total and am only up $50 on it. It was 110.94 when I put it on so timing was great. But if had studied it more would not have put on, does not have the potential of the 75P 50-40 ratio. Only about $3,500 profit possible. I saw a good 39%-43% IV skew and figured it would be good and placed it as thought mkt was going to drop hard (it did). Oh well live and learn.
Was able to reconstruct the 25-25 Dec17-Sep30 SPY calendar as I did 1/2 of it today before the drop. Was able to get the exact same IV on the Sep 80 put as did on 78P So it cost .92 and $2300. At 8-31 its a $532 loss at 110 and a $5400 gain (max) at 800. So yes cheaper and 10 to 1 from very peak (800) to unchanged. But overall the risk reward is not as good. At 80 its $5,400 gain versus $12,000 ON 50-40, and in big crash the 50-40 gives $25,000 gain whereas teh 25-25 becomes a loss. But 90-110 the 25-25 900 does do better.
Nice day for your calendar trades! Yes, the further OTM the calendar, the larger the potential reward. The two trades are quite different because of the strike prices. The 75 strike is so far away that I think it behaves more like long put options (compare your 50/40 to +6 SPY DEC 105P). The 85 strike price is much closer, and the theta is much better because of that. You're already close to the breakeven point at expiration. With the 85/85, if you want crash protection, you could add a little extra long options (like +2) or purchase something further OTM like +3 or +4 SEP 75P in case the bottom falls out. Good luck with your trades.
Thanks. Yes the 50-40 it has done very good, up about 40%. Today I sold 6 of the Sept for .63 (orig .38), but that is a quick trade planning to buy em back for .50, the mkt has dropped hard expect a 40% retrace here. If not, still a good spread. The other 2 trades of course up, but not as good. When think the retrace is over may go biger on the 50-40 one. -Darp
bot back the .64 front month ones sold Thursday at .58, after seeing how much it affected the downside potential. Decided it was not worth potentail loss of gain. Part of the idea on this trade is that we could have severe 2008/1987 style crash. So back to 50-40 ratio now. Cheers
Glad I bot back the extra options sold on front part of 50-40 on mkt bounce. What bot back under .60 os now .80. The trade is now up 90% over cost. Not counting the quickie trade that was profitable. The ES 950-860 sprd is only up 30% in comparison and today was first day it shined. A calendar (75 on SPY) way below maket with 6-3 month calendar and a 50-40 ratio seems a great way to play a crash. Thanks for help receoved here. Cheers