Sorry to be a pain Destriero but i have one more question. Regarding the timing of the calendar and the 25d risky. Say for example i am going to trade the May/Jun calendar, do you look at both of those riskies and therefore the skew of both May and Jun? Whats is the process there? What I mean to say is, is the the individual months skew a factor or do you just look at the skew of the month you are going to short, in this case May? Thanks again
No, I don't. Say that the back-month covers the NFP or GOOG earnings (NDX position), then I'd consider the term-structure, but I'd be out by the time the front expired anyway. If anything, I'd ignore the back-month knowing that it will gain from synthetic time (drift higher in vol due to upcoming macro event) and pay whatever vol is printing.