In the money Calendar Spread

Discussion in 'Options' started by jdoucet, Sep 20, 2006.

  1. Jesus, I phucking hate to repeat myself. =) Please look more closely. I was referring to the risk on the LONG CALL after assignment on his short call. The position dissects to a synthetic otm back-month long put IF the short call is assigned:

    Assigned call = short stock

    Short stock + long deferred call = synthetic long deferred put.

    The put has minimal short duration vega risk, but it's short about 30 deltas and short theta.
     
    #11     Sep 20, 2006
  2. spindr0

    spindr0

    "Jesus, I phucking hate to repeat myself. "

    LOLOL... so why did you?
    (no reply necessary... it's obvious)
     
    #12     Sep 20, 2006
  3. If the stock pays a large enough dividend and there is an ex-dividend date before the short call expiration, you might be assigned. It's happened to me.
     
    #13     Sep 21, 2006
  4. jwdoucet

    jwdoucet

    I sort of get the picture here. However, the synthetic put stuff goes right over my head so I will be doing research on that tonight.
     
    #14     Sep 21, 2006
  5. If you have access to any risk graphing tools you can put in a few examples to see how synthetic equivalents work. Try simpler ones. For example, a covered call and a naked put have equivalent risk graphs - capped profit as the stock goes higher, unlimited loss as it goes down.

    Calendars have peak profit right around the strike price and tail off in either direction no matter if based on calls or puts.
     
    #15     Sep 21, 2006
  6. jwdoucet

    jwdoucet

    Eliot, do you trade a lot of calendars? I trade a lot of iron condors but I am looking at doing just straight call/put verticals or calendars for awhile. I've done a lot of verticals but no calendars. I like iron condors but not the fact that i have commissions on four legs going in.
     
    #16     Sep 21, 2006
  7. spindr0

    spindr0

    >> If the stock pays a large enough dividend and there is an ex-dividend date before the short call expiration, you might be assigned. It's happened to me. <<

    Yes, quite true. That's another reason for doing the OTM put calendar instead of the ITM call calendar. If the short call trades below parity (which the dividend can precipitate), early exercise is more likely.
     
    #17     Sep 21, 2006
  8. spindr0

    spindr0

    Quote from jwdoucet:

    "I trade a lot of iron condors but I am looking at doing just straight call/put verticals or calendars for awhile. I've done a lot of verticals but no calendars. I like iron condors but not the fact that i have commissions on four legs going in."

    LOL. And it can be another four commissions going out :->)

    Consider an account at Interactive Brokers ($ .75 per contract) or Trade Station ($1.00 per contract). With lower commissions, you won't have to give up a good strategy like iron condors.
     
    #18     Sep 21, 2006
  9. I've only been doing calendars for a couple of months now. I don't worry much about the commissions - but I probably should. I'm mostly in XLE and OIH and got hammered in the past week or so when oil tanked (is that a pun?).
     
    #19     Sep 21, 2006
  10. Well well spindro..

    welcome over from the dark side of yahoo boards lol




     
    #20     Sep 21, 2006