Thoughts on this calendar spread?

Discussion in 'Options' started by frontyard, Feb 10, 2019.

  1. frontyard

    frontyard

    Stock price $29.98

    Sell Call strike 30 expiring one week

    Sell Put strike 30 expiring one week

    Buy 2 Calls strike 30 expiring three weeks

    Buy 2 Puts strike 30 expiring three weeks

    What do you think of this calendar spread? Any downsides? Advantages? Any thoughts or comments?
     
  2. Robert Morse

    Robert Morse Sponsor

    What are you expectations for that stock over the next 5 days?
    What makes you want to do this?
    Do you have a real example and why?
     
  3. frontyard

    frontyard

    Not certain about the path of this stock. It isn't a US stock and it's path over the next five days depends on how the local media reacts to the announcement the company makes and also on where the US markets are headed. My subjective probability is that it will soar (40% probability) after the announcement, although it could tank (20%) or remain about where it is (40%).
     
  4. Robert Morse

    Robert Morse Sponsor

    Well, that was my point. Without any expectations of where a stock will or won't trade, it is not advisable to do an option trade for a random reason. It is backwards thinking.
     
    sle likes this.
  5. Bekim

    Bekim

    Is it an earnings announcement?
     
  6. frontyard

    frontyard

    No it isn't. When I posed this on Reddit, Wallstreetbets deleted it in an hour and /r/options shadowbanned this post for a long time until I pestered them over and over again. For some reason, this post is taboo among US audiences and it either gets deleted or people seem to deliberately go on tangents.
     
  7. Bekim

    Bekim

    That's odd
     
  8. ahh. that is not a cdr spread.. thats 2 cdr spreads 'hedged' w 1 straddle in the back month. You essentially want xyz to stay quiet enough for front to expire so you can own 2 stradles, 1 cheaper offset by the credit u take in from the expired week1's . If XYZ crawls up, you lose $$ due to vega , crawls down.. eghhh.. shoot up or down hard ok since cdr loss will be offset by straddle gain.depends on the prices you put these on.
     
    destriero and frontyard like this.
  9. frontyard

    frontyard

    I don't see any loss region - see the graph at http://optioncreator.com/stey1rs
    Whether the underlying shoots up or slides down, I make a profit. At least as per Option Creator's graph.
     
  10. vega.. also took a quick look at your graph. nothing is below the line bec the vols u r using in the trade are favorable to you.. ie selling 30's buying 25 iv. of course it will look great. but just be aware of events that will flatten the term structure.or make it invert,etc.
     
    #10     Feb 11, 2019