weekly time spreads

Discussion in 'Options' started by faust, May 3, 2022.

  1. faust

    faust

    gonna leave these open ended for time being, unleash the fury - poke holes in any vulnerability points/blind spots

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    Last edited: May 3, 2022
  2. Looks like you are doing double calendar spreads. I believe the professional option traders will tell you that is inefficient. Calendar debit spreads benefit from increasing volatility which is usually seen with declining equity prices. As such, a directional consideration usually weighs significantly. I say usually because during instances of significant term structure inversion, declining volatility can actually benefit a calendar spread. For example, I had a calendar spread that had IV significantly higher in the front expiration compared to the back expiration and was hit by a large gap up, going further out of the money, and lowering overall IV. Of course front IV declined more than back IV. The value of that position doubled, which I gladly took.

    I will model an increase as well as a decrease of IV of 25% and compare payoffs for a idea of reward to risk(R/R) for one to two week calendar spreads according to risk management criteria and trade target. R/R*POP (probability of profit) can roughly equal expectation, depending on payoff structure. Optionsprofitcalculator.com gives payoff calculations for each day until expiration according to IV outlook in a spreadsheet format, among others.
     
    Last edited: May 7, 2022
  3. ensemble

    ensemble

    I wrote a scanner for double calendar spreads... They seem to be the most "tunable" of 4-leg spreads.

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