Double Calendar on MO

Written on March 26, 2008 by OptionsRopeaDope

Opened this one up today after looking at the charts (consistent range for the past year), the IV (lower-mid part of range over the last year), the skew (less the 2 percent). Taking a little chance since I am not intimate with the stock, which I would prefer to be.

New MO Double Calendar - 70 May/Apr Puts, 75 Apr/ May Calls

For a total dedit of 1.41. Should give me a little vega diversity to balance ut my condors. 
 

Delta -2
Gamma -35
Theta 15
Vega 75

Hmmm why are my thetas positive? That shouldn’t happen. My risk graph certainly doesn’t show it that way.
Once again, the greeks are for 10 spreads… I need to rethink them though. What is the best way to look at/analyze your greek position? Is it by spread? By portfolio size? By risk/margin required? I’ll need to think this through, but probably by risk exposure. And to be as accurate as possible it should actually be a percentage, or proportional. Such as “for each $1000 of risk.” If you happen to be one of the 3 readers of this blog and have any suggestions I’d certainly like to hear!

 

 

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    • Category Posted in Real Trades, Calendars, MO

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    1 Comment »

    Comment by doug
    2008-04-21 20:22:33

    the idea of a double calendar is to make money on time decay, so you absolutely want postive theta, that is good.

    -2 delta is great as you don’t have a lot of price movement risk.

    be careful of Vega risk — the 75 vega says that for every 1% increase in volatility you will make $75 on this position, conversly, you also LOSE $75 for every 1% the volatility decreases - goes lower. Therefore you always want to make sure you are buying calendars when the Volatiliy is at lows so if the volatility goes up and your position increases in value.

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