I should have looked at the close on SPX before commenting. You're modeling weekends as trading days. I'd bet the model is quoting the back vol at >200bps under the fronts. You're stressing the 5600 ratio-cal in a three calendar day trade from Friday to Monday. Again, weekends as trading days. You're stressing a x-section loss here at 50-55. 100% it loses under 5560. You're better off simply buying the 1:1 calendar at 5600. No sense in ratioing it.
Thanks for looking into this. Yes It includes the Sunday also as part of DTE. But I plotted Monday graph and it is like below. It is using 8.9, 9.1 and 10.5 as IVs in the calculation. Which I verified against barchart data, it is also showing the same IVs . Skew-lock also looks identical. I'm wondering what difference it makes!! OCC portfolio margin is showing as -300. Does it mean it adds to BP?
Identical? You're missing a structure. Ask yourself why it only works for you if the back expires on a Monday or Tuesday. You are getting your vol-confirm from another source using weekends as trading days. 100% it will lose money <5560. My thing is not a ratio calendar. Your thing drifts into a calendar backspread. Good luck holding it. You should trade it to the limit of your account.
I know you mentioned about week-end delete in many posts. Can you please shed some light on it? e.g. Consider a calendar 22AUG 5600 and 27AUG 5600. As per calendar days on Friday 16th close 22AUG 5600 has 6 DTE and 27AUG 5600 has 11 DTE. What DTEs you would use when modelling above trade? I assume it'll be 4 DTE for 22AUG and 9DTE for 27AUG.
Mondays for the backs looks great bc weekends as trading days. if you price that double Th-Fri you would never trade it. Why are Friday to Monday vols so impacted? Weekends. Everything looks like an arb when carried over the weekend. You have to treat these weekend carries (going OTB on Monday) as essentially 1, 2 day series. Well, 1 x 2.5 essentially. Yours specifically is beta to NVDA vol. It's going to get crushed and obv worse if we trade >1SD away from the current mark.