How not to pay too much 4 Calendars?

Discussion in 'Options' started by eldorado1, Nov 26, 2011.

  1. newwurldmn

    newwurldmn

    No problem.
    What does "neutral outlook trade" mean?
     
    #11     Nov 26, 2011
  2. bc1

    bc1

    Eldorado, I'm new around here and can follow your trade somewhat although I don't know which of your legs are calls or puts.

    I guess I would need to know what your overall strategy is and what your entry and exit points are in order to put this one trade into perspective. I assume direction is a part of this strategy.

    Otherwise I don't see any type of strategy here. Just appears like you are chasing a trade around according to the whim of market chop. Chasing a bad trade without any type of exit point doesn't seem like a profitable strategy to me.

    To me anyway, one of the reasons for entering a longer calendar trade is because you want to leave the trade open longer. A calendar trader has to have much more patience than say a day trader. Downside is that it ties you some of your buying power for a longer time reducing your return for the money you have at risk. Chasing the market chop could be more detrimental.

    Let us know.
     
    #12     Nov 28, 2011
  3. IVtrader

    IVtrader

    there are many factors that go into choosing a calendar- and as you are attempting to trade directionally(i e an uptrending equity)you need to make a distinction between trading ATM calendars VS OTM calendars.you also need to recognize that for an uptrending stock , the better 'directional" time spread to use is NOT a calendar BUT a butterfly. (if the stock/index is conversely is going down, THEN you would consider a OTM put calendar)

    as stocks/indexes go up, IV Goes Down. the optimum time spread to capitalize on for declining IV is a negative vega trade of which the OTM butterfly is an example. the fly will benefit from the drop in IV NOT the calendar

    ATM calendars are a positive vega trade:selection means paying attention to horizontal skew, current LOW level of IV, higher open interest and when the next earnings release is anticipate (if the proposed trade is a stock).it definitly helps is the underlying is going "sideways". if you have access to the right resources, you can check and determine what a calendar has traded for historically and that can clue you as to whether you might be getting a good price or not

    there isn't anything that makes a calendar "more easy" to adjust. other than knowing the multiple ways they can be adjusted
     
    #13     Nov 29, 2011
  4. Thanks a lot guys.
    I'd like to add that my calendar trades are doing well. Bc1, I have petiance with them. I just want to be ready for times when IV won't be on calendars favor.
    IVtrader, sure, can use iron condors and butterflies but not crazy about condor's risk/reward and butterflies' break even's.
     
    #14     Nov 29, 2011
  5. IVtrader

    IVtrader

    eldorado

    a butterfly and condor have more "flexibility" in the break evens depending on how far from the short strike you set the wings.
     
    #15     Nov 29, 2011
  6. I use to trade iron condors till last May with short strikes deep OTM and Long's 6-7 strikes away (typical trade in today's prices would be: SPY Short p 114, c 126. Long p 108, c 131) when things move up, for example, I will tighten the spread by moving up short put. The system worked well but it felt like it was just good times for condors as markets were moving up and IV going down. So I upgraded myself to calendars :)
     
    #16     Nov 29, 2011
  7. IVtrader

    IVtrader

    just remember: condors are a negative vega trade; calendars are a positive vega trade.
     
    #17     Nov 29, 2011
  8. "How not to pay too much 4 Calendars?"


    I wait till January and most Calenders are discounted 50%, by February the discount is 75% but the selection might not be so good.Is there a Calendar Club in your area? I think they have some mini sized calenders in the $5.00 range.
     
    #18     Nov 29, 2011
  9. maybe I will hedge calendars with some condors.
    in the past I tried to play a neutral-bear spread on VIX but that was just trouble.
     
    #19     Nov 30, 2011
  10. bc1

    bc1

    IV, Would you mind explaining what vega is and how positive/negative affects a trade? Thanks.
     
    #20     Nov 30, 2011