You end up making the trade? If so how do your legs look? You perked my interest so I started selling 4.55 jun calls and buying 4.50 oct calls at 1.5:1 last Friday. Today I covered the difference and rolled down to the .45s to gain some gamma. So now I'm 1:1 jun:Oct. I have never traded options this far out so I never had a feel for the lack of sensitivity and now I know if I do this again I probably would have started out 2.5:1 front to back. Also how do you know if the delta for something that far out is even accurate? I probably should have done this in demo but I can only learn with real money. I also didn't really have a plan for what to do if it went against me right off the bat so that was dumb. Here's to 4 next week!
still working on defining risk with futures spreads.. hard to.. going to look at call spread swaps to see if i can express the view.
We trade futures spreads with what we model as an emerging trend. We do not like to fade one or two or three sigma moves, because since the mid-2000's it has been a very painful way to trade. I used to trade quite a bit of Nat Gas and Power OTC options, and my preference was to trade for vol convergence and divergence - for example, I might buy July Straddles and sell Dec Strangles. I probably haven't answered your question but the futures are very good spread vehicles, especially with the SPAN margin credits. Generally speaking, the front end of the curve is more about demand and spec order flows, and the further months are more about supply and institutional order flow.
..... Trading time spreads with options introduces strike risk which is more working parts.. Atm is different for each contract.. do you trade the strangle/straddle around the atm strikes of each of its expiration.. or do you take a direction view on each expiration underlying to converge... basically how do you deal with your changing delta in the straddle/strangle time spread... this isn't a direct play on the curve.. buying july and selling dec options combos isnt similar to buying July against Dec directly in futures because of the strike risk inolved in options.. These are basically double diagonals.. another form of a calender risk in which your buying atm juice closer to expiration against your less delta sensitive options otm in the back month.... what examples could you give of when buying atm juice near expiration against back month strangles makes sense?