SURE WIN : Calendar and Reverse Calendar Spread

Discussion in 'Options' started by benysl, May 24, 2007.

  1. What? You don't just sell premium?? :confused:
     
    #21     May 26, 2007
  2. With thousands of quants searching for the tiniest of inefficiencies with budgets in the millions, to think you have found something they have overlooked speaks for the unquenchable optimism of human nature.
     
    #22     May 26, 2007
  3. DITM?
     
    #23     May 26, 2007
  4. wait for it...
     
    #24     May 26, 2007
  5. hehe , I see that circus is back in town :)
     
    #25     May 26, 2007
  6. spindr0

    spindr0

    If we're talking about RC's, by definition, it has to be a credit and more so if you're ratioing it. That credit is what you're trying to capture.

    No, I gave up the Yahoo circus a few months back. Absolute morons ruined a good forum for exchanging ideas. Do I know you by another handle?

    Spin
     
    #26     May 26, 2007
  7. spindr0

    spindr0

    How did you know what I do for a living? :confused:
    (g)
     
    #27     May 26, 2007
  8. Hey, man, it's out there. We just got to keep looking.:cool:

    [​IMG]
     
    #28     May 26, 2007
  9. I forgot that OptionVue does not model end of month expiration options on futures on ES so I cannot create a risk graph.

    Here is the scenerio then you suggested:

    Trade number 2 (Calendar Spread)
    I sell the ES (expire on 14 June) 1560 Put for 48.50 points
    I buy the ES (expire on 29 June) 1560 Put for 41.50 points
    Net credit receive =+7.00

    Assume that at expiration (forget SET for right now and treat it like how equity options expire) of normal JUNE future options, that ES is at 1520. The regualr ES options will have an intrinsic value of 40.00 points. The end of the month JUNE options will have premium of intrinsic and time value premium of, I estimate to be about 32.00 when you assume the SEPT contract will have a premium of about 10 points over the expiring JUNE spot value.

    If you were to close this out at expiration you would pay 40.00 points to cover the expiring JUNE future and sell the JUNE EOM options for 32 for a net DEBIT of 8 points. Give or take a point here on my assumption of the EOM JUNE option, you will not have any profit unless the underlying moves closer to the DITM strike of 1560. This is how any deep ITM put calendar spread woud work.

    So this bullish bias spread works if ES makes a large move to 1560 by expiration theoretically but I cannot show you a risk graph. If the market stays where it is , moves slightly higher, or moves lower you have a loss.



     
    #29     May 26, 2007
  10. Spin.. was going to send out a search party for you....


     
    #30     May 26, 2007