Odd Calender Condor stategy

Discussion in 'Options' started by nravo, Oct 29, 2007.

  1. nravo

    nravo

    One of those trader profiles in Futures magazine this month profiles some guy who does condors but with the long part of the wing a month further out than the short part of the wing. Thoughts on this strategy? I can't see how it is any better than an iron condor. He uses SP futures options, incidentally.
     
  2. wenzi

    wenzi

    Are you saying two diagonal trades ?
     
  3. The back month options would be more sensitive to volatility and less sensitive to the passage of time. I suspect he would want to have the back month options long and the front month's short so his position has a more favorable theta profile.
     
  4. wenzi

    wenzi

    True. The position would be long theta. But that would just be a double diagonal, not a condor.
     
  5. Didn't the author present some sort of case for diagonalizing the position?

    The only advantage that I can think of is that if the underlying stays within the long strike range, you end up owning the strangle at a lower cost.

    If the underlying moves outside the long strikes before near term expiration, the profit is cut into because the long option on the opposite end is getting crushed and can actually turn into a loss.

    This isn't the case with a same month condor outside the short strikes, it attains its maximum profit.
     
  6. MTE

    MTE

    It's a double diagonal, as it has been mentioned, and it is also a play on the volatility skew between the two months.