What would you call this option strategy?

Discussion in 'Options' started by BeatingtheSP500, Aug 13, 2008.

  1. Buying 2 month OTM calls
    Financing the purchase with 1 month OTM calls (but much closer to ATM)

    Delta neutral calendar ratio write?
  2. MTE


    If expirations were the same then it would be a backspread so I'd call it a calendarized backspread or a time backspread.
  3. or a diagonal spread? as it's a vertical + a horizontal. But does the name really matter?

    One thing, by have a net premium = 0 does not necessary mean net delta = 0 = delta neutral
  4. I calculated the delta to be 0, and net premium is approx 0. I put less weight on the latter. Thanks
  5. There is a long/short ratio. 2:1 to 3:1
    I think "neutral calendar ratio" might have to do.
    Does the term backspread include a ratio write?
  6. MTE


    A backspread is defined as short 1 call and long 2 higher strike calls with the same expiration.
  7. That's a 1:2 ratio spread but you're selling it not buying it. All exchanges name the options spreads (strategies) from the buy side perspective.
  8. Thanks
    Here's approx what I did:

    BOUGHT total ~25 Oct SPY calls 136, 137, 138 strike
    SOLD total ~10 Sept SPY calls 130, 131

    approx delta neutral
    approx 0 debit/credit

    the idea being:
    -if the market tanks or even goes nowhere the trade costs nothing,
    -if the SPY is in the 130- 131 range on Sept expiry then the 25 long calls are free (currently the SPY is 128.60)
    -if the market rockets then the 25 long calls can offset the 10 short
  9. you did a ratio diagonal..if your directional guess in Sept is right then you have the back month paid for...if your wrong you don't