I look at it this way - if you've decided to go long gammas and short thetas, then you've determined that options are underpriced, or true volatility is about to rise, or some combination thereof. If your expectations come true, then a big part of your profits will come from rising IV. I'd say that probably the BIGGEST part of your profits will come from a rise in IV. So why on earth would you want to have the massive sea-anchor of short back-month options dragging down your profits from rising IV just as things are going your way? On those rare occasions when IV is historically low and complacency excessively high, I love to buy naked premium. The more time remaining, the better - the more vegas and the less thetas, which is just what I want. Panic follows complacency like night follows day so when something happens and panic ensues - as it inevitably will - it's wonderful. I can't think of a nicer feeling than being long premium when the s*** hits the fan. But what a bummer it would be if I was short the high-vega options (back month) just as IV began soaring. If you want to buy premium and sell premium to help pay for it - in anticipation of future increased volatility - you'd be much better off buying back month premium and selling front month premium, buying more back month options than you sell front month options. That way you stay very long vegas while remaining neutral thetas, which gives you staying power. Or if the skew is reasonably flat you could consider buying strangles and selling straddles.
Main prob with rev calendars that most retail traders can't put it on since a regular reg T account won't allow short back months.
If you meet the margin requirements for the strategy you can do it,has nothing to do with Reg T. unless something has changed I do not know about. Most brokers treat the back month as a naked position outright or use portfolio margining for effect on purchasing power.
DMO, I'm not advocating the 4:1 ratio concept. I was just stretching to find a circumstance where the strategy might appear reasonable when viewed simplistically w/o IV change, etc.. Obviously, there are much better ways to approach the situation. And even tho it wasn't my idea nor would the 4:1 be my cup of tea, I do appreciate your detailed explanations which are clear, concise and to the point.
MushinSeeker, Reg T dictates the margin requirements not the ability to do naked writing. If you have the approval level for naked options from your broker, you have a margin account and you have the margin to support the position, you can reverse calendar to your heart's delight.
spindr0 and optioncoach, I mispoke. You are both correct in that the back month is treated as naked which has higher margin than other strategies. I have risk based margin thru my firm where I can put on Rev Cdrs very cheap vs. retail margin accounts. That is why I said it is a margin issue but not a Reg T . Sorry about that.