Dan Sheridan’s Double Calendar Rules
Written on April 16, 2008 by OptionsRopeaDope
Dan Sheridan has a new webcast out on the OIC website. Go to the Educational Webcasts page, then click Dan Sheridan on the left menu. It is dated 3/30/08, and called the “Boy Cout Tent Double Calendar Spreads.”
- 35-40 days out
- Short call and put 5-10 points out of the money
- Long options 1-3 months from the shorts
- Max loss - 20%
- Take profits at 15%
- Adjustment point - when 1/2 way between short and break even point, move 1/2 of far spreads to 5-10 points above near spread. If it keeps moving, move all far spreads up.
These are guidelines of course. Personally, I’d do calendars about 28 days out, because the theta drop is what you are profiting from, and it accelrates at about that point. Watch the webinar if you want to see more, Dan does a number of examples.
He also gets into the question of what is better - single, double or triple calendars? He shows a few graphs showing the obvious - more calendars = wider profit zone, but lower average yield. However, he also shows that from about 28-14 days, the breakevens are actually at about the same points for all 3 options - but the single makes more than the double, and the double more than the triple. Insightful!
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Posted in Dan Sheridan, Trading Rules, Calendars
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